May 31, 2024 by Pankaj
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Maximising the amount a lender will hand over to you isn’t about trying to take on unmanageable levels of debt. Taking a few simple but smart steps could mean the difference between toiling in that ‘fixer-upper’ or owning your dream home.
Shop around for lenders
Different lenders define income in so many different ways that it pays to use a credit adviser who knows their way around what’s included and what’s not. One lender may allow share dividends as income, while another lender may not.
Shop around for the right mortgage
A good mortgage broker will help you choose the most appropriate home loan for your needs. Even with one lender, your borrowing capacity can vary due to the loan type that you choose. If you add features such as a line of credit this can reduce the amount you can borrow.
Update your financial records
Try to have your PAYG income tax return as up-to-date as possible. This gives a better historical view of your income than just the two most recent payslips.
Check your credit rating
Check your credit rating before applying for a mortgage. Lenders use your credit score (or credit rating) to decide whether to give you credit or lend you money. Knowing this can help you negotiate better deals, or understand why a lender rejected you.
Roll your debts into your mortgage
Unsecured debts such as personal loans and credit cards have expensive monthly repayments, and these monthly repayments cut in to the amount you can repay on a mortgage.
Reduce debt and credit limits
If you have unused credit cards with limits that are more than you need, then cancel those cards. Every $1000 on a credit limit, even if not spent, detracts from the amount you can borrow.
Investigate a guarantor loan
A guarantor on a mortgage is the person who provides the additional security for your home loan. Most lenders prefer the guarantor to be a close relative – usually a parent, grandparent or siblings. If you guarantee a loan for a family member or friend, you're known as the guarantor. You are responsible for paying back the entire loan if the borrower can't.
Take a long loan
While 25-year mortgages have been the norm, that’s changing to 40 years in some cases. A longer loan cuts your repayments, but increases the total interest you will pay over the life of the loan.
Save more of the deposit
Lenders look for consistent saving records, preferably for more than six months. Saving more can be as simple or as hard as doing without that extra coffee, or taking your lunch to work each day. It all adds up and reduces the amount you need to borrow.
