2) All about the right Lender
The amount a bank will lend you changes from bank to bank;
I know some people are really attached to their bank and they may go into their branch as a first resource but it’s always good to get a second opinion.
Each lender uses a different criteria on their application to judge if someone is worth their money.
One simple example is some lenders may take 100% of your over time income where others just use 80%. That simple difference could cost you your first home or investment property.
Now if you think that you can take a day off work and hit all banks in town to see who will give you the best deal.
That’s wrong as well. Everytime you ask for a borrowing capacity to a different bank it creates a credit mark into your name and that can lower your credit score for when you decide to buy. This when working with a Broker pays off, as they not only work with over 44 lenders but they do it in a way that doesn’t trigger anything against your name and they know what bank would suit your situation. Check here my top Brokers.
3) Save More deposit
Having a larger deposit can increase your borrowing power.
This is because the lender sensitizes your borrowing ability based on the rate the bank will provide you plus the buffer of 2.5% in case rates were to increase.
When you have a larger deposit the bank provides you with a lower rate increasing your borrowing power due to having lower sensitized repayment.
4) Taking a longer term mortgage
The standard loan term in Australia is 30 years, however there are some lenders out there that can do up to 35 years.
That increases your borrowing ability, as the longer the term is the lower the repayments used when calculating what you can afford.
Just make sure you are aware that the interest paid in that loan will be higher as you will be paying that for a longer period of time.
However you can set up your repayments in a way where you can pay your loan before the 35 years mark and still take advantage of the more borrowing power.
5) Pay out your HECS
The banks calculate your HECS debt on a minimal compulsory threshold that the ATO requires.
Example if you are on a $70K salary the minimal compulsory repayment would be 4% of your income per annum. Which reduces your borrowing power by $45K.
As the ATO has a minimal compulsory threshold, it doesn’t matter if your outstanding debt is $20K or $5K, as the way the banks calculate the repayment is all the same.
So if you don’t have much left, make sure you pay it out before you start house shopping.
6) Reduce all your debts
Make sure you have none or minimal debts with Car Loans or Personal Loans.
Now if that’s not possible work with a broker to consolidate your debts and refinance it at a better rate. That may be a way to help you get more money.
7) Increase your income
Find a way to increase your income, get a second job, etc…
Keep in mind that banks will require a minimum history that can vary between 3 to 6 months for casual or even 24 months for Self Employed.
8) Cut Expenses
When accessing your borrowing capacity, banks will take into consideration your expenses.
Things like Groceries, School Fees, Child Care; Reducing this cost will help you increase your borrowing potential, also will help you increase your money saved up.
Be aware of where your money is going and see if there are things that your are paying for that are no longer important.
Do this at least 3 months prior to applying for a loan as banks will look at your last 3 months of expenses in order to understand your spending habits.
Now if you are on the other side of the spectrum where your spending is too low, banks will default your minimal living expenses to a minimal monthly benchmark.
So make sure you work with your
broker to find out what you can do to present the best case to the bank!
I know that must feel frustrating under the current circumstances with prices going up that you may be missing out on purchasing your home.
Remember that there will always be properties out there, you need to focus on yourself and make sure that you are ready to take action when your time is right!
Work with professionals that support your journey and that want you to succeed.
The content of this article is intended to provide a general guide to the subject matter. Professional advice should be sought from us or other professionals about your specific circumstances.
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