Due to the competitive nature of the housing market, every dollar you can spare really matters. It matters because at the end of the day a property you desire will have plenty of interest from other parties. Let’s face it, no one is going to discount you just because you seem nice or genuine in this market. As such, it’s important to maximise your mortgage borrowing power.
There are potentially three categories outlining how you could potentially increase your borrowing capacity.
Credit cards and store cards
Most of us have credit cards. Some of us have store cards such as Myer and David Jones. While credit cards are great at accumulating points, giving us free travel insurance and helping us here and there when we need access to emergency funds, it’s also a crucial factor when determining your borrowing capacity. Whether you are 100% disciplined and pay off your balance each and every month or you pay off the minimum due amount, what’s important is to have a lower limit collectively at all times. This is important because the banks take the total value of your credits cards no matter what you actually owe. If you have that extra credit card or two up your sleeve just for an “emergency”, it’s time to chop it up and cancel the card. Closing a credit card could be as simple as making a call to the respective bank.
Car loans and personal loans
Firstly, if you own a car, lenders don’t consider this to be an asset. Secondly, if you have a car loan or a personal loan, it’s not the end of the world. Check your current rate, shop around and understand that the lower the rate, the quicker you can pay off this loan. If your intention is to borrow and purchase your property in the next three to six months, it wouldn’t be the best idea to refinance your car or personal loan and have any credit entries on your credit file.If however you are great at planning and reading this 12 months ahead, you should certainly look around for some great rates to pay off your loan sooner.
Probably the most important factor when it comes to determining your borrowing power. If you are a PAYG customer (working for an employer), it’s pretty straight forward. But look at your salary sacrifice items to determine any pre-tax deductions. Each and every dollar will add a little bit of ammunition to your borrowing power.
If you receive government support (i.e. family allowance), you will need to do a bit more research on whether the lender would take these payments into consideration.
My advice for any Self Employed customers out there, if you are considering a major lender to look after you and want a real competitive rate and a comprehensive solution, get your taxes in order. Generally, the lenders will look over two years of tax declarations and average it out. Hence the more accurate your accounts are, the easier things will get.
In 2010 due to NCCP legislations, some banks started using Household Expenditure Method (HEM) to determine your standard living expenses. Then the banks compare this to what you have declared as your standard living expenses.
However, rent is one cost you can control in this instance. Minimising rent will pave the way to boosting your borrowing capacity and will also help you to save more money towards a deposit.
We have seen some families who move in with their parents for 6 months or so to minimise costs and to boost their savings towards a deposit.
How LoanDolphin can help?
There are also other ways to maximise your borrowing capacity. These methods are well known by experienced mortgage brokers and bank lenders. If your priority is to get the maximum borrowing capacity, then mention this as a priority in your auction posting with LoanDolphin. This will help the brokers or lenders understand which banks will suit your needs. From experience, we know that certain banks will be better than others when it comes to borrowing capacity requirements. This is where having a good mortgage broker or banker will matter and we have plenty of great brokers who care and are ready to put your priorities ahead of their own.
Disclaimer: This blog post has not taken into account your objectives, financial situation or needs. Due to this, before acting on any general advice/information in this communication, you should consider whether it is appropriate to your objectives, financial situation or needs.