How to improve your borrowing power before applying for a home loan

If you’re planning to buy a property, your borrowing capacity will likely largely determine how much you could spend. Lenders assess a range of factors when calculating how much you could borrow, and small changes to your finances could sometimes make a meaningful difference.

Here are a few ways borrowers often improve their position before applying.

Reduce credit card limits – Even if you rarely use them, lenders assess your credit cards based on the full limit. Lowering unused limits could improve your borrowing capacity.

Pay down personal debts – Car loans, personal loans and buy now pay later balances could reduce how much you could borrow. Clearing smaller debts could help strengthen your application.

Review your spending – Lenders closely analyse living expenses. Cutting unnecessary subscriptions or discretionary spending could improve serviceability.

Avoid new credit applications – Applying for additional credit before a home loan could impact your credit report and borrowing capacity.

Build a financial buffer – Consistent savings and a healthy bank balance could demonstrate strong financial management to lenders.

A mortgage broker could review your current position and help compare your options.