Maximise your loan borrowing affordability

Home loan affordabilityMaximise your loan borrowing affordability

With interest rates at historical lows how can you maximise your loan borrowing affordability.
 

What affects a loan affordability

  • Loan borrowing capacity can be affected by what liabilities a person has (eg.credit cards, store accounts, store finance, personal loans and vehicle finance). 
  • Excessive credit card limits and credit cards held and not used will reduce your loan borrowing capacity. 
  • Income will also determine your loan borrowing capacity. A person investing in property will increase income with the rent they’ll receive which increases loan borrowing capacity. 
  • Living expenses affect loan borrowing capacity (ie. number and age of dependants, life style). 
  • Non deductible debt versus deductible debt (ie. negative gearing). Lenders allow for negative gearing for investors in serviceability which increases loan borrowing capacity.
     

What do you need to do to maximise your loan borrowing affordability and how to meet the lenders criteria

  • Reduce credit card limits to manageable levels.
  • Cancel unused credit card accounts.
  • Consolidate debt. By consolidating credit cards, personal loans debt etc. This reduces monthly commitments on these debts and there is additional income for servicing a new loan. 
  • Have a budget and manage living expenses (eg. entertainment, restaurants etc.) which increases savings and also increases borrowing capacity.
  • Have tax returns completed and lodged, as lenders will require current financial details for a loan application. 
  • Increase repayments on non deductible debt (home loans etc.) to repay these loans quicker and also increase equity in a property to use for investment.
     

Is there a way to structure loans to increase loan borrowing affordability?

  • Having interest only split loans, being a separate loan for the investment property purchase, enables better management of the investment (ie. maximise tax benefits with negative gearing) and maximise cash flow for loan servicing. 
  • Having split banking (ie. with two lenders) can increase loan borrowing capacity with multiple investment properties.
If all loans are with one lender then borrowing capacity can be reduced with that lender, being the way that lender assesses the total loans held with it. If the client has loans with other lenders then this gives them greater borrowing capacity as those loans are not assessed at a higher repayment level, but at actual repayments.
 
If you require any help or advice on loans contact our Crosbie Finance team who will be able to assist you with all your loan enquiries.