Quick tips for increasing borrowing power
Investors have no doubt found it difficult to navigate the lending landscape at the moment, so one broker shares a tip on how investors can expand their financing by a considerable chunk.
Inner-city suburban investors might be eyeing another Sydney or Melbourne property, and while prices have come down in these areas, they are still attractive to some investors.
If investors want to prioritise their next purchase above all else, Aaron Fuda, mortgage broker at Omniwealth, recommended that they consider giving up their car and taking up public transport.
“Maybe your car commitments are stopping your home aspirations. A relatively small car debt limits the extra capital that is often needed to buy in Sydney or Melbourne,” Mr Fuda said.
“Inner suburbs have good transport links which are continuing to improve, and car costs may be the last area that couples can change to get the loan size that they need.”
Additionally, cutting down on everyday expenses, reducing credit card limits, other personal loans, and even focusing on a property with a better rental yield, can increase the borrowing power of the investor, Mr Fuda told Smart Property Investment.
As an example, Mr Fuda took the example of a couple who have a combined income of $120,000 per year, with a car loan of $20,000 and a credit card limit of $10,000, which would result in an approximate borrowing capacity of $550,000.
By eliminating the car loan and cutting their credit card limit in half, Mr Fuda said their borrowing capacity would increase by at least $100,000 up to $650,000, if not slightly more.
By taking up a principal and interest loan rather than an interest-only loan, Mr Fuda added that investors can expand their borrowing power further, as investors are likely to find they can borrow more with a principal and interest loan.
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