First Home Buyers - Increasing your borrowing capacity

First Home Buyers – Increasing your borrowing capacity

Perhaps the most common question we receive from First Home Buyers is ‘How much can I borrow?’. A great question, to start the homeownership roadmap. Calculating how much you can borrow and what your borrowing capacity is BEFORE you start home ownership is important and if suitable, obtaining a pre-approval is even better!

But what if you are not quite at that stage of a mortgage application. But you are wondering how you can increase your borrowing capacity with the banks? Well, we are going to explore this and talk about ways to increase your borrowing capacity, so when you are ready to apply for your first mortgage, you give yourself the best opportunity.

First Home Buyers – Increasing your borrowing capacity

Perhaps the most common question we receive from First Home Buyers is ‘How much can I borrow?’. A great question, to start the homeownership roadmap. Calculating how much you can borrow and what your borrowing capacity is BEFORE you start home ownership is important and if suitable, obtaining a pre-approval is even better!

But what if you are not quite at that stage of a mortgage application. But you are wondering how you can increase your borrowing capacity with the banks? Well, we are going to explore this and talk about ways to increase your borrowing capacity, so when you are ready to apply for your first mortgage, you give yourself the best opportunity.

First Home Buyers – Increasing your borrowing capacity

Perhaps the most common question we receive from First Home Buyers is ‘How much can I borrow?’. A great question, to start the homeownership roadmap. Calculating how much you can borrow and what your borrowing capacity is BEFORE you start home ownership is important and if suitable, obtaining a pre-approval is even better!

But what if you are not quite at that stage of a mortgage application. But you are wondering how you can increase your borrowing capacity with the banks? Well, we are going to explore this and talk about ways to increase your borrowing capacity, so when you are ready to apply for your first mortgage, you give yourself the best opportunity.

Salary/Business: Increase the average income earners salary by $10,000, will increase your borrowing power by ~$55,000 (Increasing from $60,000 to $70,000)

Increasing the applicant’s salary/business income will have a positive effect on the applicants borrowing power. Keep in mind that the more taxable income you have (there will be less benefit in increased borrowing ) due to marginal tax rates.

Credit card limits: Decreasing your limit by $10,000, will increase your borrowing power by ~$35,000

Most lenders will use 3% of the credit card limit as an on-going monthly commitment (this works out to be 36% p.a). First Home Buyers preparing for their first mortgage, should shut down and cut up their credit cards. Think about using a debit card in the meantime!

Second Job – A lot of lenders will accept 100% of income for servicing purposes

A second job will increase your borrowing capacity (see point 1) and it will also increase your ability to save a deposit for your first home.

HECS debt on a median income will reduce your borrowing power by ~$60,000

HECS repayments increase as your income increases. Borrowings that trigger the minimum repayment HECS threshold, will have to disclose the monthly repayments on the HECS loan. On an $80,000 income, 6% of your income is withheld to repay this loan. Additional repayment of $400 p/m. This reduces your borrowing by around $60,000.

If you have a small HECS balance outstanding, it may be worthwhile to explore the option of paying out the debt and re-running your borrowing capacity without the HECS obligation.

Avoid taking on personal loans, motor vehicle loans, after pay loans and payday loans

Taking on additional debt, especially for non-productive expenses and assets – will not only decrease your borrowing capacity – but the interest rates and rate of repayments will prevent you from saving for your first deposit.

Salary/Business: Increase the average income earners salary by $10,000, will increase your borrowing power by ~$55,000 (Increasing from $60,000 to $70,000)

Increasing the applicant’s salary/business income will have a positive effect on the applicants borrowing power. Keep in mind that the more taxable income you have (there will be less benefit in increased borrowing ) due to marginal tax rates.

Credit card limits: Decreasing your limit by $10,000, will increase your borrowing power by ~$35,000

Most lenders will use 3% of the credit card limit as an on-going monthly commitment (this works out to be 36% p.a). First Home Buyers preparing for their first mortgage, should shut down and cut up their credit cards. Think about using a debit card in the meantime!

Second Job – A lot of lenders will accept 100% of income for servicing purposes

A second job will increase your borrowing capacity (see point 1) and it will also increase your ability to save a deposit for your first home.

HECS debt on a median income will reduce your borrowing power by ~$60,000

HECS repayments increase as your income increases. Borrowings that trigger the minimum repayment HECS threshold, will have to disclose the monthly repayments on the HECS loan. On an $80,000 income, 6% of your income is withheld to repay this loan. Additional repayment of $400 p/m. This reduces your borrowing by around $60,000.

If you have a small HECS balance outstanding, it may be worthwhile to explore the option of paying out the debt and re-running your borrowing capacity without the HECS obligation.

Avoid taking on personal loans, motor vehicle loans, after pay loans and payday loans

Taking on additional debt, especially for non-productive expenses and assets – will not only decrease your borrowing capacity – but the interest rates and rate of repayments will prevent you from saving for your first deposit.

Salary/Business: Increase the average income earners salary by $10,000, will increase your borrowing power by ~$55,000 (Increasing from $60,000 to $70,000)

Increasing the applicant’s salary/business income will have a positive effect on the applicants borrowing power. Keep in mind that the more taxable income you have (there will be less benefit in increased borrowing ) due to marginal tax rates.

Credit card limits: Decreasing your limit by $10,000, will increase your borrowing power by ~$35,000

Most lenders will use 3% of the credit card limit as an on-going monthly commitment (this works out to be 36% p.a). First Home Buyers preparing for their first mortgage, should shut down and cut up their credit cards. Think about using a debit card in the meantime!

Second Job – A lot of lenders will accept 100% of income for servicing purposes

A second job will increase your borrowing capacity (see point 1) and it will also increase your ability to save a deposit for your first home.

HECS debt on a median income will reduce your borrowing power by ~$60,000

HECS repayments increase as your income increases. Borrowings that trigger the minimum repayment HECS threshold, will have to disclose the monthly repayments on the HECS loan. On an $80,000 income, 6% of your income is withheld to repay this loan. Additional repayment of $400 p/m. This reduces your borrowing by around $60,000.

If you have a small HECS balance outstanding, it may be worthwhile to explore the option of paying out the debt and re-running your borrowing capacity without the HECS obligation.

Avoid taking on personal loans, motor vehicle loans, after pay loans and payday loans

Taking on additional debt, especially for non-productive expenses and assets – will not only decrease your borrowing capacity – but the interest rates and rate of repayments will prevent you from saving for your first deposit.

If you want to learn more about how these changes impact your borrowing capacity and ability to purchase your first home, contact hfinance on info@hfinance.com.au or 1300 928 227. Free and confidential. Use the following to speak with a Melbourne Mortgage Broker, Gold Coast Mortage Broker, Preston Mortgage Broker or New York Mortgage Broker.