4 Tips to Improve Your Borrowing Capacity

When helping clients buy their first house or their next property, the question that is always at the top of the list is “How much can I borrow?”.

There are many factors that affect your borrowing capacity, and there are some things you can do to maximize your borrowing capacity when you are thinking of buying a property.

Tip 1 – Close any buy now pay later facilities (BNPL)

Facilities like Afterpay and Zip Pay can have a huge effect on your borrowing capacity, some banks can ask to see that you can afford to pay the entire amount off every month on top of keeping up with your general living expenses. If your limit is $2000, the bank will want to see you have $2000 each month to pay it back to zero. BNPL facilities have a huge effect on your borrowing capacity, pay them off and close them down if you can.

Tip 2 – New Employment

Being on an employment probation period can impact your borrowing capacity, especially if you earn allowances, overtime, and shift penalties. Many banks will want you to be clear of your probation before they will accept the additional income.

Tip 3 – Credit Cards, Personal Loans and Car loans

Although not as dire as BNPL, these facilities will still reduce your overall borrowing capacity. Where possible, pay off and close down these facilities. Depending on your total deposit amount, it could be beneficial to pay off and close down a $6000 credit card. You will have a smaller deposit towards the house purchase, but it can still increase your overall borrowing capacity.

Tip 4 – Speak to us

As your mortgage broker, we will assess your entire income, assets, and liabilities. We can make a recommendation about the structure of your lending and help you understand your borrowing capacity and the factors that affect it.

Rebecca Ravenscroft

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