For those lucky enough to be in a stable financial position, now is the time to make the most of low home prices, government initiatives and low interest rates, according to The loan Company General Manager Simon Kahl.
Speaking to New Homes, Mr Kahl said there were many ways to increase your borrowing capacity, but outlined some he described as the easiest.
Reducing your unsecured debts, such as credit cards and personal loans was a key move.
“These reduce the amount you can repay on a mortgage, so if you can reduce your high-interest-rate debts you can increase your borrowing capacity,” he said.
“In addition, if you have unused credit cards, you might want to get rid of them, as lenders will consider any credit cards to be drawn to their full limit when assessing your loan application.”
Keeping an eye on how you are spending your money and clearing debts where possible is the way to make increasing your borrowing power achievable, according to Mr Kahl.
“The first step would be to establish a budget and track your expenses for a month, and then pay off your debts as a practical step towards building your deposit,” he said.
“Also go for the easy wins first – clear any short-term credit card debt and any pay-day lenders or payment services such as ZipPay and Afterpay.
“Then focus on longer-term liabilities, such as a car loan or a student loan, as getting rid of these not only saves you money in the long run, but will also help make your financial standing more appealing to a lender. It is also important to remember that eliminating debt is not a quick fix – it takes time and patience.”
Mr Kahl said if you could save money for a home deposit, this was ideal, as banks preferred clients with a consistent saving record showing they would be able to make regular mortgage payments.
“One great way to do this is to look at cutting your discretionary spending,” he said.
“Lenders will look at all expenses, and lowering the amount you spend on things such as fast food, takeaway coffees and social spending will not only help you save money for a deposit, but increase your borrowing power.”
Seeking the advice and expertise of a professional mortgage broker was another key step to increasing your borrowing power, according to Mr Kahl.
“You want a mortgage broker that is an expert in construction and first homebuyer finance, as there are different requirements to a traditional home loan,” he said.
“Ensure their reputation and expertise is the right fit for you and your needs.”
CONTACT The loan Co, 6461 5444, www.theloanco.com.au