Tips to increase your borrowing power

24th February 2016

Sometimes affording what you can and affording what you want are two very different things.

For those looking to take their first step on to the property ladder, the word ‘compromise’ becomes all too familiar. Living inner city means a compromise on space and getting space means a compromise on location.

Not anymore. Attaining the unattainable is now possible. Increasing your borrowing power is not just down to uncontrollable factors like a raise in salary or being on the receiving end of a generous gift. Now, you can actually do something.

We’ve put together a list of handy tips that will help you increase your borrowing power and hopefully allow you to afford the house you want, rather than the one you can.

Take control of your debts

Are you in control of your debts? If not, now is a good time to start. Having numerous debts in different places makes budgeting difficult. One of the best ways to combat this is to take out a personal loan. Personal loans consolidate your debt and can be a more manageable and affordable option.

Reduce credit

Credit Cards are handy but can work against your borrowing power. Say you had a credit card with a limit of $5000 that you are not actually using. Rightly or wrongly, banks see your credit card limit as debt which reduces your borrowing power. If possible, it is wise to lower the limit of your credit cards or better yet, get rid of them altogether.

Shop around

Perhaps surprisingly, banks and lenders assess financial situations differently, therefore it pays to shop around. Go out and compare different home loans products and find a home loan that offers a borrowing limit you are happy with.

Split debts

If your partner isn’t going to be on the mortgage, splitting your liabilities with them can result in a higher borrowing power. By halving your liabilities, you will be a more attractive borrower to the banks, which in turn effects your borrowing ability.

There are certain rules around this, so always speak to a My Local Broker before proceeding.

“If you want something you've never had, you must be willing to do something you've never done." - Thomas Jefferson

Extend your loan term

Extending your loan term will dilute your monthly repayments which can increase your borrowing power. Another possibility would be to opt for an interest only loan. This loan option means that all you’ll be paying on a monthly basis is the interest (rather than the principle and interest) resulting in lower mortgage repayments and higher borrowing power.

No substitute for saving

The most obvious option, but also the most effective and it could be the difference in buying a home you can afford and buying a home you want.


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