8 Mortgage Broker Tips to Increase Your Borrowing Capacity in 2023. Are you a first time home buyer feeling a bit lost about how much you can borrow for your dream home? Well, in this video, I’ll give you eight practical tips to help you increase your borrowing power so you can have greater flexibility and options when it comes to purchasing the property you want.
What is Borrowing Capacity/Power?
But first, let’s start by defining what borrowing capacity means. Put simply, it’s the amount of money you can borrow when buying a house and it can differ depending on whether you’re purchasing an investment property or not. Your total income and expenses will affect the total home loan and the loan term available to you so it’s important to ensure that your principal and interest rate payments are affordable.
Factors Considered by Lenders When Assessing Your Borrowing Power
When determining your borrowing capacity, lenders consider several factors such as whether you’re applying for a loan by yourself or with a partner, the number of dependents you have, your annual income, savings, monthly living expenses, debts, and credit limits. To get an idea of your borrowing capacity, feel free to use our borrowing power calculator in the description below. It will help you immediately see your monthly repayments interest rate and the total amount you could borrow. So now that you have a good understanding of borrowing capacity and how lenders calculate it, let’s discuss eight of these best tips for you to increase it.
First up, is to pay off any existing debts before applying for a home loan. This includes credit cards, personal loans, and car repayments. When you have less debt, lenders are more likely to lend you more money, and paying off your debts will also improve your credit score which is always a good thing.
Tip number two is to reduce your expenses. Take a look at your spending habits and see where you can cut back. Maybe it’s eating out less, canceling subscription services, or finding better deals on utilities.
Tip number three is to save a larger deposit. This means setting a budget and prioritise your savings. The larger your deposit, the less you you need to borrow which increases your chances of securing a loan at a favourable interest rate.
Tip number four is to increase your income. Consider taking on extra work, renting out a spare bedroom, or freelancing. A higher income demonstrates your ability to meet mortgage repayments making lenders more likely to approve your application.
Tip number five is to know your credit score and make credit repairs if needed. A good credit score means you demonstrate responsible credit behaviour which lenders like. You will most likely qualify for lower interest rates and fees when applying for a home loan. If your credit score is less than ideal, consider taking steps to improve it. This can include paying your bills on time, paying off any outstanding debts, and disputing any errors you find on your credit report.
Tip number six is to choose a longer-term loan. While longer-term loans means paying more interest, it can increase your borrowing capacity. Spreading your a payments over a longer period makes each payment more manageable and reduces the strain in your finances each month, giving you more flexibility to save or invest in other areas.
Tip number seven is to shop around for the best deal. Don’t settle for the first offer you receive. Do your own research and compare different lenders to find out the ones that offer you the best deals and matches your financial needs.
Last but not least, seek professional advice. Mortgage brokers are qualified professionals who can provide valuable guidance on securing a home loan. Schedule an appointment with them to discuss your current financial situation and borrowing capacity. They can help you identify challenges and suggest ways to navigate them. Ultimately, increasing your chances of securing a home loan, maximising your borrowing capacity, is key to owning your dream property, and these eight tips we have discussed can help you achieve your goals.
Get in touch with Lendstreet
If you want more tailored advice, don’t hesitate to get in touch with us here at Lendstreet. Our team is well-versed in the mortgage application process and can provide you with the guidance you need. Otherwise, if you have any questions or comments, feel free to leave them below. And if you like this video, give it a thumbs up and subscribe to our channel for more informative content just like this. Thanks for tuning in, and we’ll see you in the next video.