Increase your borrowing capacity by reducing your credit card limits.
Lenders now typically assume that your credit card will cost a monthly 3.75 per cent of its limit, even if unused. For example, if you have a $10,000 limit, that’s $375 of your repayment capacity for a home loan each month, gone.
If you have a $50,000 limit – that’s $1,875 of your salary that will be considered ‘‘unavailable’’.
Even for someone with a $150,000-a-year income, $1,875 a month less money is going to dramatically reduce your borrowing capacity.
The above in conjunction with lenders now calculating your home loan repayments at 7.25 per cent interest (another regulator rule change) makes a massive difference.
Below are the categories that Lenders are now seeking information on for each application.
It is worth reviewing where possible to cut costs in the three months prior to an application, to maximise your borrowing capacity.
Groceries (and other household expenses)
Clothing and personal car
Owner-occupied utilities and rates
Investment property utilities and rates (if applicable)