26 Oct 2020

There are several factors that may affect your capacity to borrow and its imperative to be aware of them and how they may impact your next loan application.

Before you embark of your next home loan application take to time to consider the following factors to ensure you are on track to securing the loan amount you would like.

Living expenses

Lenders will reconcile the amounts declared in your application for your general cost of living with activity on your transaction statements so it’s imperative to ensure what you declare is honest and realistic. It may pay to ask yourself if there are any ongoing expenses that are not necessary, or you could survive without. For instance, do you use your gym membership? Do you have more streaming services than you need? Could you pare back the frequency of how often you dine out? The less your day to day outgoings are, the more funds you have available to service a loan.

Credit card debts and limits

Applicants often regard their credit card in terms of the outstanding balance rather than the total credit limit, but that isn’t how the lender sees it. Even credit cards with a zero balance that are rarely, if ever, used need to be declared as they still represent the potential of future debt. If you have a card you do not use, close it or if you do not need the entire limit you have, request your credit provider reduce it.

Personal Loans

Any other commitments such as personal loans or car loans will affect your capacity to borrow so if it is possible, work on paying them off as soon as possible. If you have a short amount owing, endeavor to pay it off and free up those funds for your home loan. Similarly, if you use services such as Zip Pay and Afterpay, look at clearing those liabilities as they also have a bearing on what the bank will lend, which many potential borrowers are not aware of.

Check your credit report

Your credit history may impact your capacity to borrow. If your credit score is compromised due to tardy conduct on previous commitments or from multiple credit enquiries, there may be an impact on your access to credit and how much you are able to borrow. It can therefore be prudent to obtain a copy of your credit file before applying for a loan to ensure there is nothing detrimental on there that may hinder your application.

If every dollar you can borrow counts when seeking a new loan, an audit on your current outgoings may result in lightening your expense load and being able to borrow more.

Want to know how much you can borrow? Contact one of our mortgage brokers today and we can let you know and give you guidance on where you may be able to trim some fat to get more out of your next loan application.

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