02 Feb BOOSTING YOUR BORROWING POWER
It’s been a long time between posts! Today a quick look at some things you can work on to Boost your borrowing power.
When looking to purchase a new property the amount you can borrow is an important factor in getting the property you want or need. You may find that the amount you wish to borrow is more than your borrowing power. In some cases there is nothing that can be done and you need to change your plans or time frames to accommodate this. However sometimes changes can be made to help Boost your borrowing power and get you the property you really want!
You can check your rough borrowing capacity here!
Clear Personal Loans
While you may only owe a small amount on your personal loan or car loan, the effect it can have on your borrowing power can be substantial. Even if your car loan only have $4000 left owning, the repayment based on the original $20k loan would be used. We added a car loan of $20k at 10%pa with a repayment of $424/m to a borrowing capacity scenario. The difference the addition of the car loan made was $56k.
Reducing Credit card limits and closing Store Cards
Many of us are guilty of having multiple credit cards with limits available, even if we don’t use or need them. It is often a case of “I don’t use the card” or “I pay it off in full” and while this may be true, from the lenders perspective these are debts which need to be taken into account when establishing your borrowing capacity. Even if you have a credit card with a limit of $20k, which you don’t use the bank will still be assessing it based on the $20k limit. This could add a liability repayment of $700 a month to your expenses which will have a major impact on your borrowing ability.
Review your Expenses
All lenders require you to submit your living expenses as part of your application to see if you are above or below their determined “average cost of living”. If you are living above the average cost there is an opportunity to review your expenses. Look at expenses such as Pay TV, additional cars which may not be required, eating out, reviewing your insurances or utility providers. Any area which you spend in excess and where changes can be made will free up funds to assist with servicing of your loan.
Choosing the right lender
This is where the value of a Mortgage Broker comes into play even more. Depending on your income type, for example casual, Some lenders will accept the income at a higher percentage than other. For example one lender may take only 80% of income via casual employment where as another lender may take the full 100%. Other income sources such as Overtime, bonuses, government income, pensions and rental income are also commonly capped by lenders at below 100%. Finding a lender which will accept the income you have to best support your application can be so important.