Your borrowing power is a critical consideration when purchasing your first home in Adelaide. It will impact how much you can spend on a property. Also, your borrowing capacity will differ from lender to lender.

Here are some possible ways to improve your capacity to expand your property options.

What Is Borrowing Capacity?

It is an evaluation from your lender about how much you can lend on a home loan. The lender considers factors like your income, age, expenses, job status, existing debts, whether you have any dependents or not, and an array of other factors.

Here are five smart ways you can increase your borrowing power:

1. Compare Home Loans

One of the simplest ways to improve your borrowing power is to shop around for the best loan product for you. Look for different options and maybe consult a mortgage broker in Adelaide that specialises in your situation, for instance, self-employed mortgages.

2. Reduce Your Debts

Unsecured debts like personal loans and credit cards are expensive and reduce the amount you can repay on a home loan. Hence, when you work to reduce your high-interest debts, you can improve your borrowing capacity. For instance, you would not accrue interest when you pay off your credit card in one go during every interest-free period, which can also work opportunely when looking at your credit score.

3. Debt Consolidation

Another alternative is to consolidate your debts, so you can only have one payment per month. In other words, it will be only one part of the debt that is accruing interest. It is strongly recommended; you should try to pay down any of this type of ‘bad debt’ – like a car loan or personal loan – before applying for a mortgage.

4. Think About Splitting Liabilities

Rather than purchasing a property in your name, you can also split the expenses on paper with your partner. For instance, if you can verify that your partner can and will provide for your dependents financially, they may not be included as your dependents in the home loan application.

5. Document Your Finances

With stringent loan serviceability criteria, it is a smart move to document your finances – including all your outgoings and incomings. It will provide you with a thorough assessment of your daily living expenses. It is of specific importance for self-employed applicants who sometimes experience a more arduous loan serviceability assessment.

If you are ready to start your first home buying journey, talk to one of our lending specialists in Adelaide to find out how much you can borrow.

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