Ways to increase your borrowing power

So you’ve found a home that ticks all the boxes, but your borrowing power doesn’t quite match the price guide. At any point of the property price cycle, it’s important to understand factors that impact your borrowing power, and ways you can increase your borrowing power.

Save for a bigger deposit

Taking the time to save for a bigger deposit can help you increase your borrowing power – it shows lenders that you’re able to save money, over a period of time. A bigger deposit shows lenders that you have good savings and are potentially a low-risk borrower. The bigger your deposit, the lower your Loan to Value (LVR) will be and the smaller your loan will be – this means over time you’ll probably pay less interest.

Most lenders require 20% of the purchase price as a deposit. Learn more about our eligibility criteria.

Cut back on your spending

How much you spend on day-to-day household expenses will also impact your borrowing power. If your household expenditure is high, spend the time analysing how much you spend and what categories you’re spending on. Drawing up a budget and identifying discretionary expenses you can cut back on, or remove completely, may help you increase your borrowing power. Some examples include:

• Spending more time cooking and eating at home (instead of ordering take-out).
• Relooking at your insurance costs and negotiating with providers to find a cheaper alternative.
• Cancelling paid subscription services and/or reducing how often you go out.
• Taking public transport instead of rideshare services.
• Reducing entertainment expenses including dining out, purchase of alcohol, gambling, etc.

You don’t have to cut back on your avo on toast consumption – making it at home is a cost-friendly alternative to your local café.

Repay your existing debt

Like emotional baggage, your existing debt might be holding you back. The more existing debt you have, the less you can borrow. Repaying existing debt & loans can help you increase your borrowing power in the long term. Examples of debt include:

• Credit card debt
• Loans such as personal, car, business and margin.
• HECS-HELP loans
• Line of Credit

Learn more about how debt and expenses impact your application here.

Managing your credit cards

Your existing credit cards and the credit limits on them will decrease your borrowing power, regardless of your credit history. Credit cards are seen as high interest, revolving debt and during the application process, lenders look at your maximum credit limit (for eg: $10,000), not how much you spend – whether it be $10 or $3,000. By cancelling your credit card, or even reducing your credit limit, you can increase your borrowing power.

Your borrowing power is determined by how likely you’ll be able to make loan repayments. By understanding the factors that impact your borrowing power like existing debts & expenses, and your credit score, you can find ways to increase your borrowing power.

This article is intended to provide general information only. It does not have regard to the financial situation or needs of any reader and must not be relied upon as financial product advice. Please consider seeking financial advice before making any decision based on this information.‍