8 ways to increase your
home loan borrowing power

man looking at his finances

 Estimated read time: 5 Minutes

The higher your home loan borrowing power, the more options you could have. And the good news is, there are plenty of ways to help increase your borrowing capacity – here are eight of them.

Buying a home will likely be one of the biggest purchases of your life. Whether you’re looking to buy your first home, refinance or buy an investment property, it helps to know how much you can borrow. This is known as your borrowing power or borrowing capacity, and is typically the first step in the home buying process.

Your borrowing capacity will vary between lenders and even between different home loan products with the same lender. While every lender uses a slightly different method to calculate borrowing capacity, there are several things they will always look at including your credit history, income, expenses and debts as well as the size of your deposit.

If your borrowing capacity is lower than you’d like, here are eight things you can do to try and improve it. 


credit score

1. Know your credit score

Your credit score is an individual score based on credit reporting data. If you’ve defaulted on a bill or missed a credit card payment in the past, your credit score may be lower. Some lenders may take a lower credit score as a sign that you could be at higher risk of being unable to keep up with your mortgage repayments and decline your application. However, some non-bank lenders like us can often take a more flexible and personalised approach.

If you know your credit score, you can avoid any surprises and take steps to improve it if necessary. You can check your credit score for free every three months through Illion, Experian or Equifax.

Increase your income

2. Increase your income

Your income is one of the biggest factors lenders will look at when deciding how much you can borrow. Negotiating for a raise or promotion at work may be an option for some. Otherwise taking on extra hours at work or even a second part-time job could help boost your earnings.

At Pepper Money we consider a range of alternative income sources including Centrelink, child support, rental income amongst others, so make sure to include all types in your home loan application. 
Reduce your expenses

3. Reduce your expenses

Along with your income, lenders will also look closely at your living expenses when assessing your application. To increase your borrowing power, it could help to look at how you can trim your rent, utilities, childcare costs (if you have kids) and any other ongoing payments. 
Reduce your debts

4. Reduce your debts

If you’re applying for a mortgage, reducing your debts could help to increase your borrowing power. That’s because when assessing how much you can borrow, lenders will use a figure known as your debt-to-income ratio (DTI) – that is, the amount of debt you have compared to your overall income.

When calculating your DTI, lenders tend to look at any credit card debts, buy-now-pay-later debts, car or personal loans, HECS/HELP and any other home loans you have. 

You can calculate your DTI by adding up the total amount of your debts and dividing by your gross annual income (before tax). The fewer debts you have, the lower the ratio – and the better your borrowing capacity is likely to be.  

Tip: If you have a high DTI, you may be able to reduce it by paying off your debts, reducing your credit card limit, or refinancing any loans to a lower interest rate.  

Reduce your excess credit limits

5. Reduce your excess credit limits

When deciding how much you can borrow, lenders will assess any credit cards you have as if you have used them to their full limit. For example, if you have one credit card with a $10,000 limit and another one with a $5000 limit, your lender will assume you have a $15,000 debt, regardless of how much you have spent on them.

If you have unused credit cards, or cards you’re not really using much, it may be worth reducing the limits or getting rid of them altogether.

That being said, if you do have a credit card, having a lower credit limit and managing your card and repayments efficiently can help with borrowing because it helps to show that you’re in control of your finances.

You can calculate your DTI by adding up the total amount of your debts and dividing by your gross annual income (before tax). The fewer debts you have, the lower the ratio – and the better your borrowing capacity is likely to be. 

Save for a higher deposit

6. Save more money for your deposit

A higher deposit could help to reduce your loan to value ratio (LVR), which is the amount you’re borrowing as a percentage of the total value of the property. Most lenders won’t lend over 95% of the total property value, and many will offer a better interest rate for a lower LVR.

Generally, if you want to avoid paying Lenders Mortgage Insurance (LMI), it’s a good idea to aim to save a 20% deposit. Saving a bigger deposit also means you may need to borrow less, reducing your overall repayments and interest. And showing a consistent record of savings could also help increase your borrowing capacity, as it shows financial responsibility over time.

If you already have a home loan, the equity in your home could be used to help reduce your LVR and potentially get you a better rate. Some lenders may also accept a guarantor – usually a family member with equity in their home who is willing to provide security for a portion of your home loan.

Tip: If you’re feeling overwhelmed, here are a few tips and tricks that may help you save for your home deposit.

Choose longer mortgage term

7. Choose a longer mortgage term

When you opt for a longer mortgage term, you can spread out your repayments over a longer timeframe and reduce the amount you will pay each month. This may allow you to borrow more and still be able to pay it back comfortably. However, be aware that a longer mortgage term also means you will pay more interest over the life of the loan. Crunch some numbers using our online home loan repayment calculator.
Choose the right home loan product

8. Choose the right home loan product

Different lenders have different ways of assessing borrowing capacity. And there may even be different products available to suit your needs within the same lender. For example, at Pepper Money we have options aimed at helping people with a low credit score, or self-employed borrowers who may need some flexibility around how they prove their income.

Not everybody’s situation is the same. Luckily there’s a wide range of options for boosting your home loan borrowing power.  

Thinking about applying for a home loan? See how much you could borrow with our borrowing power calculator


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We've got the online tools and calculators to help get your home loan journey underway. Work out how much you may be able to borrow and even quickly find out what indicative interest rate you might be eligible for.

Information provided is factual information only and is not intended to imply any recommendation about any financial product(s) or constitute tax advice. If you require financial or tax advice you should consult a licensed financial or tax adviser.

All applications for credit are subject to credit assessment, eligibility criteria and lending limits. Terms, conditions, fees and charges apply. 

The results of the borrowing power calculator are based on information you have provided and is to be used as a guide only. The output of the calculator is subject to the assumptions provided in the calculator (see 'about this calculator') and are subject to change. It does not constitute a quote, pre-qualification, approval for credit or an offer for credit and you should not enter commitments based on it. The interest rates do not reflect true interest rates and the formula used for the purpose of calculating estimated borrowing power is based on the assumption that interest rates remain constant for the chosen loan term. Your borrowing power amount will be different if a full application is submitted and we complete responsible lending assessment. The results in the calculator do not take into account loan setup or establishment fees nor government, statutory or lenders fees, which may be applicable from time to time. Calculator by Widgetworks.

Pepper Money Personal Loans is a brand of Pepper Money Limited. Credit is provided by Now Finance Group Pty Ltd, Australian Credit Licence Number 425142 as agent for NF Finco 2 Pty Limited ACN 164 213 030. Personal information for Pepper Money Personal Loans is collected, used and disclosed in accordance with Pepper’s Privacy Policy & the credit provider’s Privacy Policy.

Pepper Money Limited ABN 55 094 317 665; AFSL and Australian Credit Licence 286655 (“Pepper”). All rights reserved. Pepper is the servicer of home loans provided by Pepper Finance Corporation Limited ABN 51 094 317 647. Pepper Asset Finance Pty Limited ACN 165 183 317 Australian Credit Licence 458899 is the credit provider for asset finance loans.

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