6 ways on how to improve your borrowing power

Published on December 1st, 2020
  Written by 
Bill Tsouvalas
Bill Tsouvalas is the managing director and a key company spokesperson at Savvy. As a personal finance expert, he often shares his insights on a range of topics, being featured on leading news outlets including News Corp publications such as the Daily Telegraph and Herald Sun, Fairfax Media publications such as the Australian Financial Review, the Seven Network and more. Bill has over 15 years of experience working in the finance industry and founded Savvy in 2010 with a vision to provide affordable and accessible finance options to all Australians. He has built Savvy from a small asset finance brokerage into a financial comparison website which now attracts close to 2 million Aussies per year and was included in the BRW’s Fast 100 in 2015 as one of the fastest-growing companies in the country. He’s passionate about helping Australians make financially savvy decisions and reviews content across the brand to ensure its accuracy. You can follow Bill on LinkedIn.
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You might have your eyes set on a potential dream home. However, looking for ways to finance your way into your home might seem daunting at first glance. Especially if you are still trying to get you’re your finances in order. Before anyone beats you to it and snatch’s up your potential home, we have come up with six ways to increase your borrowing power when it comes to securing a home loan.

1. Asses your financial stumbling blocks

The first step in improving your borrowing power is to admit your weaknesses, and dealing with them immediately. Track your financial history through factors such as your credit history; regular living expenses, property deposit, assets, income and commitments; and the value of the property you wish to buy. Go through these with a fine-tooth comb to find holes that could weaken your borrowing power. See if there are any possible changes, and cuts to make your finances appear in more of a good shape than they currently are. What you could do to improve your borrowing power is to grow your property deposit.

2. Stabilise your financial fort

You need to appear as someone who is stable and has control over their finances. Try to keep a stable employment and place of residence, which can increase your chances of appearing as a trustworthy applicant to lenders. Now is the perfect time to rid yourself of any credit cards you no longer make use of. Having too many credit cards can reflect badly, as it could project someone who is not stable in their finances.

If you own three credit cards with each owing $5,000 your lender will see it as $15,000 of debt against you. It’s advisable to let go of things that could sink your smooth sailing into landing a home loan.

3. Pay your dues

There is good debt, and there is bad debt. The only difference is, are you able to pay these on time? We sometimes take out loans that we think we can pay off, but life happens. Paying your outstanding fees on time, or in advance can swing things in your favour as you appear to be more responsible with your finances. Constantly keep abreast of paying outstanding fees. Your debt can be used as a stepping stone rather than a stumbling block to introspect your spending habits, and removing things that will affect your financial future.

4. You don’t have to settle

While you are still learning to flex your borrowing power, you don’t have to settle for the first loan that comes your way. It might sound good, or even look good, but is it really good value for you in the long run? You can look around for home loans that offer you the best interest rate for your income. Research what is on the market and see if you can find better interest rates from various mortgage brokers. This in turn can also save you some extra money. If your home loan is $300,00, and the original interest rate and payment is at 6.26% ($1,849.10) at a discount of 0.1%, you could end up saving $5,842.80 on your loan.

5. You can wield your secret weapon

Unless if you are a maths boffin, estimating how much you can borrow can be a bit tricky. When you are looking for a mortgage, it’s always best to know in advance what you can and cannot afford before you are met with the constant disappointment of being turned down. You can use a borrowing power calculator as a great tool. However, it does have its limits as it only gives you a rough estimate. Your next best bet is having a financial advisor who can assist you.

6. Saving will help you save the day

Start saving. Once you finished reading this make plans to not only cut down, but start saving. Small change might appear to be nothing, but an accumulation of this small change can make a difference when it comes to the term of your home loan. If you can set aside 20% of small change that you collect every month can help you pay off your mortgage.

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This guide provides general information and does not consider your individual needs, finances or objectives. We do not make any recommendation or suggestion about which product is best for you based on your specific situation and we do not compare all companies in the market, or all products offered by all companies. It’s always important to consider whether professional financial, legal or taxation advice is appropriate for you before choosing or purchasing a financial product.

The content on our website is produced by experts in the field of finance and reviewed as part of our editorial guidelines. We endeavour to keep all information across our site updated with accurate information.

Approval for home loans is always subject to our lender’s terms, conditions and qualification criteria. Lenders will undertake a credit check in line with responsible lending obligations to help determine whether you’re in a position to take on the loan you’re applying for.

The interest rate, comparison rate, fees and monthly repayments will depend on factors specific to your profile, such as your financial situation, as well as others, such as the loan’s size and your chosen repayment term. Costs such as broker fees, redraw fees or early repayment fees, and cost savings such as fee waivers, aren’t included in the comparison rate but may influence the cost of the loan. Different terms, fees or other loan amounts may result in a different comparison rate.

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