Ways to increase your borrowing power
Learn how to increase your borrowing power with some things to consider to help you secure the home loan you want.
So you’ve found a home that ticks all the boxes, but your borrowing power doesn’t quite match the price guide. At any point of the property price cycle, it’s important to understand factors that impact your borrowing power, and ways you can increase your borrowing power.
Save for a bigger deposit
Taking the time to save for a bigger deposit can help you increase your borrowing power – it shows lenders that you’re able to save money, over a period of time. A bigger deposit shows lenders that you have good savings and are potentially a low-risk borrower. The bigger your deposit, the lower your Loan to Value (LVR) will be and the smaller your loan will be – this means over time you’ll probably pay less interest.
Most lenders require 20% of the purchase price as a deposit. Learn more about our eligibility criteria.
Cut back on your spending
How much you spend on day-to-day household expenses will also impact your borrowing power. If your household expenditure is high, spend the time analysing how much you spend and what categories you’re spending on. Drawing up a budget and identifying discretionary expenses you can cut back on, or remove completely, may help you increase your borrowing power. Some examples include:
- Spending more time cooking and eating at home (instead of ordering take-out).
- Relooking at your insurance costs and negotiating with providers to find a cheaper alternative.
- Cancelling paid subscription services and/or reducing how often you go out.
- Taking public transport instead of rideshare services.
- Reducing entertainment expenses including dining out, purchase of alcohol, gambling, etc.
You don’t have to cut back on your avo on toast consumption – making it at home is a cost-friendly alternative to your local café.
Repay your existing debt
Like emotional baggage, your existing debt might be holding you back. The more existing debt you have, the less you can borrow. Repaying existing debt & loans can help you increase your borrowing power in the long term. Examples of debt include:
- Credit card debt
- Loans such as personal, car, business and margin.
- HECS-HELP loans
- Line of Credit
Learn more about how debt and expenses impact your application here.
Managing your credit cards
Your existing credit cards and the credit limits on them will decrease your borrowing power, regardless of your credit history. Credit cards are seen as high interest, revolving debt and during the application process, lenders look at your maximum credit limit (for eg: $10,000), not how much you spend – whether it be $10 or $3,000. By cancelling your credit card, or even reducing your credit limit, you can increase your borrowing power.
Your borrowing power is determined by how likely you’ll be able to make loan repayments. By understanding the factors that impact your borrowing power like existing debts & expenses, and your credit score, you can find ways to increase your borrowing power.
Unloan is a division of Commonwealth Bank of Australia.
Applications are subject to credit approval, satisfactory security and you must have a minimum 20% equity in the property. Minimum loan amount $10,000, maximum loan amount $10,000,000, and total borrowings per customer across all Unloan loans is $10,000,000. (For purchase loans a minimum 10% equity is required - however a Lenders Mortgage Insurance (LMI) premium and higher interest rate apply. In some cases, depending on the property’s location or type, an LMI premium may also be required for LVR between 70.01% to 80%). For loans with Lenders Mortgage Insurance (LMI) the minimum loan amount is $10,000, maximum loan amount is $3,000,000 and total borrowings per customer across all Unloan loans is limited to $3,000,000).
Unloan offers a 0.01% per annum loyalty discount on the Unloan Live-In rate or Unloan Invest rate upon settlement. On each anniversary of your loan’s settlement date (or the day prior to the anniversary of your loan’s settlement date if your loan settled on 29th February and it is a leap year) the margin discount will increase by a further 0.01% per annum up to a maximum discount of 0.30% per annum. Unloan may withdraw this discount at any time. The discount is applied for each loan you have with Unloan.
*At Unloan, we do not charge any annual, application, banking, account, transaction, late or exit fees. In certain circumstances you may be required to pay a Lenders Mortgage Insurance (LMI) premium. Learn more about why this is applied and how it works. Government fees may also apply. Learn more about government fees here. Your current lender may charge an exit fee when refinancing.
Tax law is complex and subject to change. For the latest information, check the ATO website or with your accountant or financial advisor.
Unloan is a division of Commonwealth Bank of Australia is also not a registered tax (financial) adviser under the Tax Agent Services Act 2009 and you should seek tax advice from a registered tax agent or a registered tax (financial) adviser if you intend to rely on this information to satisfy the liabilities or obligations or claim entitlements that arise, or could arise, under a taxation law.
Applications are subject to credit approval, satisfactory security and you must have a minimum 20% equity in the property. Minimum loan amount $10,000, maximum loan amount $10,000,000, and total borrowings per customer across all Unloan loans is $10,000,000. (For purchase loans a minimum 10% equity is required - however a Lenders Mortgage Insurance (LMI) premium and higher interest rate apply. In some cases, depending on the property’s location or type, an LMI premium may also be required for LVR between 70.01% to 80%). For loans with Lenders Mortgage Insurance (LMI) the minimum loan amount is $10,000, maximum loan amount is $3,000,000 and total borrowings per customer across all Unloan loans is limited to $3,000,000).
Unloan offers a 0.01% per annum loyalty discount on the Unloan Live-In rate or Unloan Invest rate upon settlement. On each anniversary of your loan’s settlement date (or the day prior to the anniversary of your loan’s settlement date if your loan settled on 29th February and it is a leap year) the margin discount will increase by a further 0.01% per annum up to a maximum discount of 0.30% per annum. Unloan may withdraw this discount at any time. The discount is applied for each loan you have with Unloan.
*At Unloan, we do not charge any annual, application, banking, account, transaction, late or exit fees. In certain circumstances you may be required to pay a Lenders Mortgage Insurance (LMI) premium. Learn more about why this is applied and how it works. Government fees may also apply. Learn more about government fees here. Your current lender may charge an exit fee when refinancing.
Applications are subject to credit approval, satisfactory security and minimum deposit requirements. Full terms and conditions are found on our Unloan Terms and Conditions. Modified Terms and Conditions will be set out in our Notice of Variation Agreement, if you are approved. This article is intended to provide general information only. It does not have regard to the financial situation or needs of any reader and must not be relied upon as financial product advice.
