Unlock Financial Opportunities: Learn How To Borrow More Money from the bank

Whether our clients are looking to purchase their own home or invest in their first (or next) investment property, the majority of people often hit a roadblock when it comes to borrowing money from the bank.

The key lies in understanding your 'Serviceability' – i.e., your borrowing power, which determines how much the banks are willing to lend you. It's a crucial factor that can impact the properties you can purchase – their type, number, size, and location.

So, what can you do to improve your borrowing power? Let’s explore some expert tips that have empowered countless clients to secure efficient loans from the bank.   

1. UNDERSTAND DEBT – THE GOOD & THE BAD

   Debt can be either good or bad for wealth creation.

   Bad Debt

   Bad debt includes non-income producing and non-tax-deductible lifestyle expenses, like credit cards, personal loans, and car loans, negatively impacting your borrowing power.

   Good Debt

   Good debt helps build wealth, generates income, and is tax-deductible, such as investment property loans and equity for investments.

2. ELIMINATE HIGH INTEREST DEBT

Life's unpredictability can lead to financial distress, with mounting debt from credit cards, personal loans, and car loans. High-interest rates and repayments can impact future borrowing.

Some potential ways to deal with it include:

• Consolidating more than one debt into a new loan with manageable repayment and loan terms.

• Moving to interest-only repayment on home or investment loans for a while to increase cash flow to pay off high-interest loans.

3. OPT FOR LONGER LOAN TERMS

Longer-term loans mean lower monthly repayments, which can be beneficial to boost your serviceability. However, it also means that the interest you pay throughout your loan can be higher.

For example, repayment on a $500,000 home loan with a 3% mortgage interest rate over 30 years Principal and interest repayment can be as below:

• For 25 years loan term: $2,372 monthly

• For 30 years loan term: $2,109 monthly

Remember, there are other ways to pay off your home loan faster apart from having a shorter loan term.

4. KNOW YOUR CREDIT SCORE

Your credit score plays an important role in how lenders will see your application.  A credit score is one indication of risk. The higher the score, the stronger your application.

Some simple ways to improve your credit score:

• Pay all your bills and loan repayments on time.

• Avoid applying for too many loans within a short span of time.

• Make payment arrangements with your lender if you are unable to make repayments on time.

• Get your credit report at least once a year to keep a check on your score and watch out for any fraudulent activity that may have occurred.

5. REDUCE SPENDING AND AVAILABLE CREDIT

The best way to inspect is to inspect your budget is by looking into your last three months’ bank and credit card statements and evaluating where the unnecessary spending is.

Below are some quick tips:

• Stop digital subscriptions like Spotify, Netflix etc. that you may no longer use.

• Review and see if you can get cost-effective options for your utility's suppliers, insurance etc.

• If you have high credit card limits, you can consider lowering them as it will help increase your borrowing power. For example, a $10,000 credit card limit can reduce your borrowing capacity by almost $50,000.

TEAM SONI CAN HELP

While the tips are simple and it can really add value to your cashflow, trying to figure it out all on your own can be overwhelming. Seeking professional help from an experienced professionals can go a long way. 

If you would like to find out more or speak to one of our Team members, Book your No-Obligation Consultation now.

We would love to help you make the decision with confidence.