One of the most important first steps in buying a home is knowing your borrowing capacity. This is simply how much banks are willing to lend you for your home new. But if you’re not able to borrow as much as you’d like, you’ll need to work out how to increase your borrowing capacity.
There are a few different ways you can increase your borrowing power depending on your situation. At No1 Property Guide, we’ve helped thousands of clients secure their new home. Many of whom originally didn’t have a borrowing capacity high enough to service a loan.
The first step is understanding your factual options. And the easiest way to discover your options is to complete our simple pre-qualification form. With this, our New Home Consultants will be able to advise exactly how much you can borrow and what your house and land package options are.
Then, if your borrowing power isn’t as high as you’d like, we’ll work with you to help increase it. Or if you want to get started now and put yourself into the strongest position possible, keep on reading to discover our tips on how to increase your borrowing capacity.
Cut Back on Spending & Increase Your Borrowing Capacity
Probably the most common tip you’ll get for increasing your borrowing capacity is to cut back your spending. Reducing your regular expenses frees up more of your income to go towards your home loan.
If you’re planning this in advance, then put the money you gain from cutting back into your savings. This will help you save towards your deposit as well!
On the other hand, if you’re trying to get into the market ASAP, then cutting back on your spending will free up more of your regular income to go towards your mortgage repayments. This will essentially let you afford larger repayments, increasing your borrowing capacity and new home options.
We recommend trying to cut back on your spending and reducing regular expenses 3-6 months before you put in formal applications. As most lenders require up to 6 months of banking history.
Try to Save a Deposit
Another one of the more obvious solutions, but saving a deposit is a great way to increase your borrowing capacity. While it’s possible to get into the market without one. In fact, it’s what we specialise in here at No1 Property Guide. But having a deposit simply opens up even more options for you.
If you can put money together to form a deposit, great! Lenders feel more confident when you’re able to front a deposit. And they’re more willing to lend money to applicants with a larger deposit. But don’t stress if you can’t save up that kind of money.
At No1 Property Guide, we’re specialists in no or low deposit house and land packages. We’ve helped thousands of renters become homeowners without needing the huge 20% deposit most lenders require.
Filling in our pre-qualification form is the first step. From there, our New Home Consultants will simply guide you through the journey from renting to homeownership.
Consolidate Debts to Increase Your Borrowing Capacity
A big factor banks and lenders will consider is any existing debts you have. These debts are commitments that will eat into your regular income and reduce the available funds you have to pay back your loan.
Cutting credit cards or and paying off any debts you can is a great way to reduce your liabilities. If you have multiple different debts that you can’t afford to simply pay off, then consider a debt consolidation.
By consolidating your debts into a single, fixed-rate low-interest repayment, you might be able to reduce your repayments significantly. Freeing up more of your income to go towards servicing your mortgage.
Increase Your Income
Finally, while it’s not always an option, increasing your income is another way you can potentially increase your borrowing power.
Talk to your boss about a pay increase, look at additional overtime options, or if possible, consider freelance and side-hustle gigs that can increase your overall income.
Of course, at the end of the day, getting into the market ASAP is the most important step. Whether you’ve got a deposit or not, No1 Property Guide has options to help you escape the rental nightmare once and for all.
When you enquire through our simple pre-qualification form, our New Home Consultants will assess your situation to get an accurate estimate of your borrowing capacity. Many clients who thought they didn’t have a high enough borrowing capacity find out quickly that through Darren Walters’ no or low deposit system, they actually do have options.
Getting into your own home doesn’t need to be as hard as you think it is. Contact our team today to discover how we can help you secure your own no or low deposit house and land package today.