10 Ways to Increase your Borrowing Power!

Borrowing money is complicated at the best of times, sometimes little things can make a big difference! We’ve broken down some of the key things, and in no particular order, that may help when it comes to negotiating with the banks.

Pay off debt. Now this sounds obvious I know, and you need to speak to your mortgage adviser before launching into it as there are times, we need to preserve deposit money before paying down debt. But little things like Laybys, store cards, personal loans all adversely affect borrowing power. 

Check for old store cards and hire purchases that might still be open but have been long forgotten. Often big retail stores will give you a facility limit for a hire purchase rather than a facility specific to the item. They could be long paid off but if the facility limits are still open, the banks will use a % of the limit as an expense, and its not a good look if they have been forgotten about and not declared!

Reduce overdrafts, credit and store card limits where possible (or cancel them). Banks will often use 3-5% of the card limit as a monthly expense, thus lowering your borrowing power. Even if you pay them off monthly, it’s easier just to lower the limit or cancel them altogether (applies to Laybys and Afterpays also). 

Keep your business financials up to date. The more up to date the financials are, the more accurate record of income that a lender can use. Having more taxable income will help.  

Reduce your KiwiSaver contribution to 3% if paying more. Using the 3% contribution will help increase borrowing power, you can always increase the contribution % after you get the mortgage. 

Change to being a permanent employee rather than casual. Banks can be tough on casual income, unless we can show a long, consistent track record of it. 

Have 20% deposit. Easier said than done right!? But having a bigger deposit will mean most banks will use a smaller buffer required on their monthly servicing calculator determining borrowing power. 

Consider having a Boarder/Flatmate. Now this does need to be sustainable and room in the house to allow it. For example, a couple with 2 kids buying a 3-bedroom house would struggle to convince a bank of the sustainability. Some banks have now made it easier with Boarder declaration forms rather than showing proof of an actual boarder.

Consolidate debt. If paying off debt is not quite feasible, then consolidating what you have into one loan at lower payments than what you are currently paying will help. 

Buy with a friend or family member. For some single people on one income, buying by yourself can be difficult to get a meaningful budget. Seek out a sibling or close friend who may be in the same boat as you looking for a home you could jointly own. 

For any questions or advice specific to your situation, feel free to contact Craig Pope!