10 ways to increase your borrowing capacity

Maximising the amount a lender will hand over to you isn't about trying to take on unmanageable levels of debt. It's a matter of taking a few simple, but smart, steps that could mean the difference between toiling in that fixer-upper or owning your dream home.

1. Shop around for lenders

Different lenders  define income in so many different ways that it pays to use a mortgage broker (like Edge Lending Solutions in Toowoomba) 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.

2. Shop around for the right mortgage

A good broker will help you choose the most appropriate mortgage. 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.

3. Update your financial records

Try to have your income tax return as up-to-date as possible. This gives a better historical view of your income.

4. Check your credit rating

Check your credit rating before applying for a mortgage. Due to the changes in the Privacy Act from 12 March 2014, your rating may not be as healthy as you thought.

5. 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.

6. Reduce debt and credit limits

If you have unused credit cards with limits that are more than you need, then cancel those cards. Also, cancel any other cards - such as department store cards - that give you credit. Every $1,000 on a credit limit - even if not spent - detracts from the amount you can borrow.

7. Investigate family guarantees

Guarantor or family guarantees may let your parents or family take out a second mortgage on a percentage of their own property to guarantee repayment to the bank if you fall behind. 

8. Consider shared equity

Some lenders will give you a larger mortgage in return for a certain share of the profits when you sell. If you don't make a profit, then the lender does not take a share.

9. Take a long loan

While 30-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.

10. Save more of the deposit

Lenders look for consistent saving records, preferable for more than six months. Saving 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.

Looking for a mortgage broker in Toowoomba? Edge Lending Solutions can help you achieve your goals and find you the perfect loan.

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