Are you concerned about recent interest rate hikes affecting your home loan plans? Despite three months of rate stability, concerns persist about the possibility of future increases. This apprehension affects both experienced investors and first-time homebuyers. While rate stability offers temporary relief, the ever-changing economic landscape keeps borrowers on their toes, highlighting the importance of careful financial planning and staying informed about market developments. At Pointer Finance, we’re here to be your trusted guide to ensure you have a solid financial strategy that can adapt to potential shifts in interest rates, ensuring that your long-term financial goals remain within reach.
We’ve compiled seven valuable tips that will empower you with the knowledge to increase your borrowing power.
Let’s dive into the first tip:
Manage Your Credit Card Limits
If you possess credit cards with high spending limits that you’re not actively using, it’s advisable to consider reducing those limits or closing the accounts altogether. Lenders assess your credit cards when evaluating your ‘creditworthiness’. They consider not only your current debt but also your potential debt based on credit limits.
Taking action to lower or close unused credit cards demonstrates responsible financial planning and can positively impact your borrowing capacity.
Clear Other Liabilities
If you have outstanding debts such as student loans or ‘buy now, pay later’ commitments like AfterPay, prioritise paying them off. Reducing your financial obligations makes you a less risky borrower in the eyes of lenders and enhances your ability to borrow more in the future.
Seek Additional Income Sources
Explore opportunities to boost your income, such as bonuses, commissions, overtime, allowances, dividends, family support, or tax-free earnings. Supplementing your regular income not only provides financial stability but also increases your flexibility when it comes to managing debts and unexpected expenses. Additional income sources play a vital role in expanding your borrowing capacity when applying for a home loan.
Consider Principal and Interest (P and I) Repayments
Opting for the common principal-and-interest (P and I) repayment structure may help you qualify for a larger loan. This choice often comes with lower interest rates, calculated based on a 30-year repayment plan, making it easier to meet the criteria for a larger loan.
However, carefully consider how this decision aligns with your overall investment strategy.
Leverage Joint Ownership
If you have a partner with their own income, consider involving them in the loan application process. Joint ownership can significantly increase the amount you can borrow, as your combined income presents a more attractive prospect to lenders.
Embrace a Frugal Lifestyle
Living within your means and trimming unnecessary expenses can make you a more eligible candidate for a larger loan. Demonstrating financial responsibility and prudent management of day-to-day expenses reduces your risk as a borrower and showcases your readiness for homeownership.
Explore Non-Traditional Lenders
Non-traditional lenders can offer more flexibility, especially when it comes to considering various income sources and existing debt obligations. Keep in mind that these lenders can charge higher interest rates, however could offer lower assessment rates overall. When choosing a loan, remember that interest rates are just one factor; your unique financial goals should guide your decision.
At Pointer Finance, we specialise in helping you maximise your borrowing capacity while navigating changing market conditions. We’re committed to helping you secure your dream home. To get started or explore your borrowing potential, don’t hesitate to reach out to us today. You can also check out our Borrowing Power Calculator.
Let us point you in the right direction and turn your homeownership dreams into a reality.