Borrowing Power

What is it? Your borrowing power also sometimes referred to as borrowing capacity, is the amount that you can borrow.

How is it determined? To make sure that you can meet your mortgage repayments, most lenders will usually base your borrowing power on your current income and deduct any expenses, debts or liabilities. So in simple terms, the more debts and liabilities that you have, the lower your borrowing power will be.

Here are some handy tips that will help boost your borrowing power:

1. Start by establishing a regular savings history. Lenders will always start by asking to see at least 6 months proof of your savings history.
2. Reduce your bank overdraft limit if you don’t need it. An overdraft limit is usually an indication of how much potential debt you can get into, it therefore impacts negatively on your borrowing capacity.
3. If you can, avoid lease and hire purchases. These are often regarded as liabilities which can decrease your borrowing power.
4. Reduce your credit card limit. Reducing your credit card limit or getting rid of unnecessary credit cards will increase your disposable income and thereby boost your borrowing power.
5. Make sure your credit history is blemish free. You can view your credit history on My Credit File.
6. Review your current situation with a mortgage broker. Because a mortgage broker is an industry insider, they know which home loan packages are right for you and can even help negotiate a cheaper interest rate.