Some clients come to us asking to maximise their borrowing capacity, here are a few tips we look at to increase borrowing capacity, it is definitely worthwhile talking with a mortgage broker firstly to make sure these options could assist your personal situation;
- Credit Cards – When lenders look at credit cards they assess the repayment as 3-5% of the credit limits. I would suggest 3 options, firstly reduce unneeded limits, 2nd if you were to consolidate the credit cards to a personal loan over 7 years the repayment should be reduced compared to the 3-5% repayment. Another option although not as beneficial for the new loan immediately could be a Credit Card Balance Transfer some bans offer rates of 0% for up to 16 months, this option would be beneficial for you to reduce your credit card debt balance. Although this option may not immediately increase borrowing capacity it does allow clients to reduce debts quickly and reduce limits.
- Loans – You could consider contacting your current provider and extending the loan term to 7 years for personal loans and 30 years for home loans to reduce the required minimum monthly repayment, by reducing the minimum payment it allows you to borrow more on the new home loan. You may also be able to reduce your repayments on home loans to interest only which again would reduce the required monthly payment. In most cases you can continue to repay the higher repayments, it would be a good idea to check with your lender when requesting the extended term.
- Close Debts – If you have any unused accounts like credit cards please close them off, check with your broker first as they may need to use some funds for deposit or fees.
- Minimise credit enquiries – When lenders do a credit check they can see how many applications have been completed in the past 1, 3, 6, 12 months. Some mortgage insurers will not accept a loan if there is more than 5 credit enquiries.
We have many more strategies that could help especially with low deposit home loans.
Always talk to your mortgage broker first as every application and client have there own needs.