Simple Tricks to Increase Your Borrowing Capacity

Simple Tricks to Increase Your Borrowing Capacity If you’re planning to buy a home, then chances are you already understand just how difficult it can be to get approved for the amount you want to borrow. Strict guidelines and regulations govern lenders to ensure that they are lending responsibly. While these policies are great for borrowers overall, they mean that if you aren’t aware of what the lenders consider when deciding how much you can borrow, you can end up with a lower approval than you hoped for. The good news, though? It’s easy to maximise your borrowing potential if you know what to do.

1. Understand what the lenders will look at.

It’s standard procedure for lenders to request bank statements from you when considering your loan application; this allows them to get a realistic look at your daily living expenses and financial health. Lenders will usually want the previous six months of statements, a necessary factor to keep in mind in the lead up to your decision to borrow. You may find that simply committing to improving the appearance of your bank account and waiting a few months has a significant impact on how much you can borrow.

2. Cut the credit.

The more lines of credit you have open, the lower your borrowing capacity will be. This is pretty straightforward – any open loans, credit cards, etc., consume a portion of your borrowing capacity. While many borrowers understand this, few realise that even BNPL (buy now, pay later) services contribute toward borrowing capacity assessments. Keep your credit cards only to what you need, either by reducing the number of cards you have open or lowering your limits.

3. Start saving early.

When considering your loan application, most lenders will want to see a history of genuine savings. More than just paying for deposit, your saving history demonstrates your ability to be fiscally responsible and indicates that you would be a good borrower. Lenders like to see a savings history of at least three months, though longer is better.

4. Clean up your credit history.

Having a clear credit history and high credit score will significantly impact how much you’re able to borrow. Defaults, excessive enquiries, and late payments can all affect your credit. Thoroughly checking your credit file and disputing any discrepancies is good practice before you lodge that application.

5. Speak with an expert.

Taking the time to speak with a financial advisor or mortgage broker can help you better understand where you stand financially and what you should expect when putting your application forward. Brokers can also help you find loan products best suited to your circumstances, and may recommend lenders you wouldn’t have otherwise considered.