Have you been unable to buy a property or refinance a loan because a bank or other lender won’t let you borrow as much as you need? Perhaps the lender assessed your financial situation and concluded you can’t afford the proposed repayments. Lenders are required by law to do this type of assessment. They can’t waive this even if you have a large deposit, except for some business lending.
This assessment makes perfect sense - who would want a loan that puts them into financial hardship? The lender puts your income and expenses into a calculation however, each lender looks at your situation differently. So, if you know you can afford the repayments here are a few tips for increasing your borrowing power when lenders don’t see things the same way.
- Shop around. There can be substantial differences in the way various types of income are treated including self-employed income, casual income, commissions and bonuses. There can also be substantial differences in the way existing commitments are treated including credit cards and other loans.
- Review your loan structure. All the following can alter your borrowing power:
- The loan type (EG variable, fixed or Line of Credit);
- The loan term;
- The type of loan repayments (EG Interest-Only or Principal & Interest repayments).
- Negotiate a lower interest rate. Some lenders will allow you to increase your borrowing power, at others it will make no difference.
- Reduce your credit card limits. The limit is more important than what you owe.
- Reduce the limit on other home or investment loans if you have amounts available to redraw.
- Payout and close personal loans, car loans or HECS/HELP or similar debts. This may require you to use some of your deposit or add these debts to the new loan.
Why you need to call us
Calculating your borrowing power with a range of lenders is a complicated and time consuming process if you do it yourself. When you meet with us we will calculate your borrowing power for more than 20 lenders and provide expert advice about all the options for your circumstances.