Many buyers now rely on Mortgage Brokers to get their property loan. The main reason for this is they understand the relationship between debt and income with regards to all lenders borrowing criteria.

If you have a credit card with a $10,000 limit, then your borrowing power will be reduced by around $40,000. If you have a personal loan of only $6,000 your lending capacity could be reduced by as much as $19,000. Most people do not know or understand this relationship but luckily a good broker does and will guide you through the process of preparing for a loan application so that you get the best result and highest loan option available.

The broker will advise you what to do in preparation for applying for the loan. In some cases this may be cancel a credit card, cancel store cards, eat at home for a few weeks to increase savings and finally if all else fails, sell one of the kids…..

Each bank has its own lending criteria and the broker will know all of them. When you go to a bank, you are only offered that banks products and they may not suit your requirements or situation. The broker may know that ANZ does not have a product that suits however WESTPAC may be the best solution. So instead of getting a knock back and feeling deflated, the broker will only send the application to the lender who he knows is looking for that type of client and loan.

We always strongly recommend that a buyer talks to a broker before they contact the bank. Often if the bank says ‘no’ that does not mean the buyer does not qualify for a loan, it just means they do not qualify for that bank’s types of loans.

To increase your borrowing power you have 2 clear pathways. Firstly reduce debt, and secondly increase income. Sounds simple enough but let’s look deeper.

Reducing debt simply means trying to pay out any credit cards or personal debts that require ongoing monthly payments. The bank’s lending formula really impacts on total lending power if monthly payments are required to other sources.

Increasing your income might sound easy also, but most of us have been trying to do that our entire lives. One way to do this is to buy the property with a partner which increases total income (2 incomes) and increases lending power. Another way is to make sure you add all income such as rebates, rental income and deduction and make sure the lender values your employment type or status. Some lenders only value 60 -80% if income earned while casually employed while others may recognise 100% in their criteria for lending.

A broker knows all the criteria of every lender and they will find you the best possible outcome. They do the leg work and you get the rewards.