How to Increase Your Borrowing Power in Australia: A Complete Guide

Understand Your Current Financial Position

Before you can effectively increase your borrowing power, it's essential to understand your current financial position. This includes having a clear picture of your income, expenses, existing debts, and credit score. Start by reviewing your financial statements and credit report to identify areas for improvement. Knowing where you stand will help you make informed decisions about how to enhance your borrowing capacity.

Increase Your Income

One of the most direct ways to boost your borrowing power is by increasing your income. Lenders assess your ability to repay a loan based on your income levels. Here are some practical ways to achieve this:

• Seek a Raise or Promotion: If you're in a stable job, consider discussing a salary increase with your employer.
• Take on Additional Work: Freelancing or part-time opportunities can supplement your income. Just ensure this additional income is consistent and verifiable.
• Invest in Skills Development: Acquiring new skills can lead to better job opportunities and higher salaries.

Reduce Existing Debt

Your debt-to-income ratio is a critical factor that lenders evaluate. Reducing personal debt can significantly increase your borrowing power:

• Pay Off Credit Cards: Aim to clear outstanding credit card balances. High-interest debts are particularly detrimental to borrowing capacity.
• Consolidate Loans: Consider consolidating multiple debts into a single loan with a lower interest rate.
• Avoid New Debts: While planning to apply for a mortgage, avoid taking on new loans or credit cards.

Improve Your Credit Score

A healthy credit score can enhance your borrowing power as it demonstrates your reliability as a borrower. Here are ways to improve your credit score:

• Regularly Check Your Credit Report: Ensure there are no errors or fraudulent activities affecting your score.
• Pay Bills on Time: Consistently paying bills by their due dates can positively impact your credit score.
• Limit Credit Applications: Frequent applications for credit can negatively affect your score. Be strategic about when and where you apply.

Build a Larger Deposit

A larger deposit not only reduces the loan amount you need but also demonstrates financial discipline to lenders. Consider these strategies:

• Create a Savings Plan: Establish a dedicated savings account for your deposit and contribute to it regularly.
• Cut Unnecessary Expenses: Review your monthly budget to identify areas where you can cut back.
• Utilise Windfalls: Use bonuses, tax refunds, or gifts to bolster your deposit savings.

Choose the Right Lender

Different lenders have varying criteria for assessing borrowing capacity. Working with a mortgage broker like Esteb and Co can help you find a lender whose policies align with your financial situation. We have access to a wide range of lenders and can match you with the one that offers the best terms for your needs.

Common Mistakes to Avoid

• Overlooking Fees and Charges: When calculating your borrowing power, consider all associated fees and charges. These can affect the total amount you can borrow.
• Ignoring Long-Term Financial Stability: Ensure that increasing your borrowing power does not jeopardize your long-term financial health. Consider future expenses and potential changes in income.
• Underestimating Living Expenses: Be realistic about your living expenses. Lenders will scrutinize these, and underestimating them can lead to over-borrowing.

How Esteb and Co Can Help

At Esteb and Co, we understand the complexities of increasing your borrowing power. Our team of experienced mortgage brokers is here to provide tailored advice and support. We take the time to understand your unique financial situation and guide you through the process of enhancing your borrowing capacity. Whether you need assistance with financial planning, lender negotiation, or understanding loan options, we're here to help you achieve your property goals.