Ways to Maximise your borrowing power
Interest rates, serviceability or your borrowing capacity, assessment rates, loan products, services, fees, and charges. These things can be an overwhelming experience to wrap your head around. Not everyone understands the full capacity of their own borrowing potential. That’s why you need to book in with one of our highly specialised First Home Buyer brokers at MortgageBuzz to utilise your best chance of obtaining the right home loan for you and the right lender.
Your chosen broker will hold your hand from start to finish and use their knowledge and expertise to maximise the potential of your income and increase your borrowing capacity by taking you to the right bank that has the right credit policy for you.
Keep in mind that we all think every lender is the same, but they are not, every lender has different risk appetites which is written in their credit policies so not one size fits all. At MortgageBuzz we have the education and training to find the lender that suits your situation and position. With over 60 plus lenders on our panel, we have many options and products that suit your individual needs.
We are commitment to you from start to finish and you will have our attention and we make you a priority not a number. Our mission is to treat everyone with respect and give a high-quality service and no less is acceptable. It doesn’t stop there, your broker at MortgageBuzz is here for the life of your loan, negotiating your interest rates throughout your loan and maintaining any changes that you may require as your financial life journey changes.
Below are some examples for you to educate yourself, so continue reading as knowledge is POWER!
13 Steps to Increase Your Borrowing Power.
1. Reduce or clear debts and liabilities.
Liabilities lower your borrowing capacity, such as credit cards, car loans, By Now Pay Later accounts, personal loans, store cards, and anything similar affects how much you can borrow with lenders.
If you can clear or reduce your liabilities before proceeding with your loan, or lower your credit limits, this can have a positive impact on your borrowing power and get you a better deal.
If you are not able to clear the balance, debt consolidation may be a better option for you by reducing your monthly repayments and increasing your borrowing power and cashflow.
2. Have your credit score checked by a MortgageBuzz Broker.
Having your credit score checked by your broker at the time of discussing your loan to ensure your credit history is clear is important and gives your broker an indication of which lenders are available to you.
If you have been on time with all your repayments, banks will look more favourably on you and potentially negotiate a lower interest rate, increasing your borrowing capacity.
3. Increase your monthly cashflow with budgeting.
By making balanced decisions and cutting expenses that are no longer needed, or by reducing or avoiding unnecessary expenses can help at maximising your borrowing power. Lenders will want to see six months of your living expenses, and by reducing expenses and having a good budgeting habit, you will improve your servicing.
4. Genuine Savings.
Lenders look at your saving pattern for the last 3 months and require you to save a 5% genuine deposit of the purchase price to qualify for a home loan. We understand that saving a deposit could be challenging especially if you have a young family and you’re paying rent. Some lenders allow rental payments by using your rental ledger to prove genuine savings.
By having a larger deposit, you will reduce the amount of money you will need to borrow and reduce the amount payable on your Mortgage Insurance (LMI) policy.
5. Cross collateralisation
You can also avoid having to pay Lender’s Mortgage Insurance by having a second security added, either one that you own, or by a second party such as a guarantor (parent or close family). By using both property values, you decrease the Loan to Value Ration (LVR) of your loan, avoiding Lender’s Mortgage Insurance, and potentially lowering the interest rate, and by doing so, increasing your borrowing power.
6. Government Schemes.
Accessing government schemes could avoid many fees and charges. For example, if you are a First Home Buyer, you can take advantage of the government’s Low Deposit Scheme, or if you are purchasing a brand new home should be eligible for a First Home Buyers Grant (FHBG) allowing you to borrow higher than you normally could without having to pay for Lender’s Mortgage Insurance or give $10 – $20 depending where you purchase. There are many schemes available for many situations, such as people that have not owned a home in the last 10 years, single parents, same sex couples, and recently the government has opened the ability for Permanent Residents to access some of these Schemes.
7. Avoiding or decreasing Stamp Duty payable.
By purchasing under $600K Stamp Duty is eliminated for a First Home Buyers or purchasing up to $750K you may qualify for a lower Stamp Duty. There are other ways of qualifying for a discount on your stamp duty, you may have a concession card that your solicitor or conveyancer can use to lower the Stamp Duty payable.
Note, that you will have transfer fees to pay and potential fees such as house rates or water rates, maybe land tax, settlement fees. Your broker at Mortgage will estimate a buffer on your loan application so you do not have a shortfall at settlement. Our funds position report that we provide you will explain what your costs ensuring you a non-stressful settlement. We want you to be excited on the day of your settlement not stressed.
8. Consider a non-conforming lender.
Non-conforming lenders are a type of lender that considers loan scenarios that other traditional banks wouldn’t. They have a wider range of products and are more flexible when it comes to servicing power which can potentially give you a better borrowing capacity. Keep in mind however, that non-conforming lenders generally may have a higher interest rate than conforming lenders.
9. Self-Employed.
If you are self-employed, generally you will need to show one to two years of your financials. Two year is normally averaged and could lower your servicing capacity. A lender that only needs one year could increase your borrowing power. Add Back, Interest and once off expenses could be used to increase your income.
10. We work alongside with your Accountant.
If you are self-employed make sure that you speak to your accountant and let them know that you are wanting to purchase or lend money so when your tax returns are due this is kept in mind. As we all know your accountant helps minimize your tax payable by lowering your income. A conversation with your accountant prior to organising a loan could be beneficial and improve your servicing capacity. Your broker at MortgageBuzz is more than happy to organise an appointment with you and your accountant to ensure that we are all on the same path.
11. Over-time
Depending which industry, you’re in, overtime could be calculated differently with different lenders, some lenders could use a lower percentage of overtime than other lenders. Choosing the right lender could maximise how much overtime is used thus increasing your borrowing power. Also increasing your overtime, you work should boost your income therefore increase the amount you can borrow.
12. Casual Income
Increasing your hours at work will help increase how much you can borrow, although you will need to choose the right lender as different lenders use different percentages. Most lenders policies want to see six months of employment in a casual job to average your annual income.
13. Other income
Bonuses, Commissions, allowances, company cars, child maintenance, pensions, family benefits A&B and trust income, boarders, or rental all this could increase your income. Self-employed Add backs, depreciation, once off expenses all this could make up a part of your income. Don’t worry MortgageBuzz brokers will ask you all the right question and uncover!
Frequently Asked Questions
Many first-time home buyers may carry student debts, which generally lowers your servicing capacity as this may be deducted from your salary or pay. You may choose to pay off this debt with part of the money you have saved for your deposit. Although do not pay this debt off until you speak to one of our First Home Buyer’s specialist brokers at MortgageBuzz. You don’t want to decrease your deposit without advice from your specialised First Home Buyer broker.
We are all aware that at times we all have gone through financial stress or more severe financial challenges like bankruptcy, it doesn’t automatically disqualify you from securing a home loan. At MortgageBuzz, we recognize that life can be unpredictable. We’re dedicated to helping you obtain a home loan; we have specialised partners that may help clear your poor credit history.
The Loan-to-Value Ratio (LVR) is a crucial factor that lenders consider during a home loan application. It illustrates the relationship between your property’s value and the size of your loan, presented as a percentage. For instance, if you’re borrowing $800,000 for a property valued at $1,000,000, your LVR would be 80%.
Lenders use the LVR to evaluate the risk of a loan; higher LVR indicates higher risk for the lender. Maintaining an LVR of 80% or less might enable you to borrow more at favourable rates and with lower repayments. If your LVR exceeds 80%, you might need to pay Lender’s Mortgage Insurance or access one of the available government schemes or involve a family member as a guarantor to lower your LVR. Don’t worry if this is complicated your dedicated MortgageBuzz specialist understands the complexity of LVR’s and will explain LVR to you at your appointment.
Different lenders have distinct risk profiles for lending, which can evolve due to various internal and external factors. At MortgageBuzz, we possess insights into each lender’s preferences and lending capacities. We engage with lenders daily, using the right inquiries to maximize your borrowing potential and present tailored loan alternatives.
Role of a Mortgage Broker like MortgageBuzz
Navigating the intricate landscape of borrowing capabilities and home loans can be overwhelming. With our experienced and knowledgeable mortgage brokers, MortgageBuzz can be an invaluable partner throughout this journey. Here’s how we provide assistance:
1. Personalized Financial Assessment:
Collaboratively, we will comprehensively assess your financial status, encompassing income, expenses, and financial aspirations. This information serves as the basis for accurately determining your borrowing capacity and products and services you need.
2. Access to Diverse Lenders:
As impartial specialists, we here at MortgageBuzz maintain an extensive network of lenders, including banks, credit unions, and non-bank institutions. Our experience enables us to adeptly compare loan offerings from various sources to identify the most suitable option for your requirements.
3. Negotiation and Application Support:
At MortgageBuzz we take charge of negotiating with lenders on your behalf, aiming to secure competitive interest rates and favourable loan terms. Additionally, we aid in compiling and submitting your loan application, simplifying the process.
4. Continuous Guidance and Support:
Throughout the home loan application and approval process, Mortgage Buzz ensures unwavering support. We will address your inquiries and providing full transparency and understanding at every step of the journey.
Your MortgageBuzz broker is more than happy to organise property reports, engage with Real Estate Agents on your behalf to ensure that you purchase at a competitive price. We communicate with the Real Estate giving them confidence that you are the better candidate from all other purchasers or bidders. We keep your agent involved all the step of the way of your loan application, so the vendor sees you as the best candidate.
We can help organise you’re building and pest inspection. Put you in touch with one of our trusted conveyancers or solicitors for your settlement and work with them all the way to settlement. Our conveyancer and solicitors are more than happy to read your section 32 and ensure that the property you purchase has no hidden conditions or faults or damage.
Our trusted partner will make sure that you don’t sign a contract that puts you or your deposit at risk. Making sure that you are not making a mistake on your purchase.
Should you want even more extra attention your MortgageBuzz broker is more than happy to come along and support you if the property you are purchasing is going to auction.
Or come along when you are signing your Contract of Sale and advice you on what special conditions you require like ‘Subject to Finance’ or ‘Subject to Pest and Build’. Maybe you require a Deposit Bond if you do not have the full deposit which needs to be a special condition or Government Grants.
With MortgageBuzz you will be in excellent hands, no doubt about it because we have a high expectation of our team and hold each other accountable. No less is acceptable.
We hope this helps you to understand ‘maximise your borrowing power’. MortgageBuzz will help you in your journey. Contact a MortgageBuzz Broker for more tips on ‘How to Maximise your Borrowing Power’. Book in with a zoom meeting or a face-to-face appointment on 1300 081 557 or email hello@mortgagebuzz.com.au
Let’s make dreams together come true!