Insights from our Head of Mortgages, Global Finance
Do you have your heart set on a home slightly out of your budget? We understand, that securing the adequate and right loan is never easy.
But with good strategic planning and help from a mortgage broker, it’s possible to borrow the desired loan amount, of course which you can service also – even if your income is on the lower side.
Global Finance Head of Mortgages, Aseem Agarwal, shares his tips for securing the maximum home loan amount.
1. Check discretionary expenses
One of the best ways to improve your chances of borrowing a higher amount is to carefully assess your discretionary spending. Think gym memberships, Netflix accounts, Spotify, Apple TV and insurance premiums. These expenses often go overlooked but can significantly impact your borrowing ability. So, are they essential? Aseem says that by identifying areas where expenses can be trimmed, you make yourself more attractive to lenders:
“While the Credit Contracts and Consumer Finance Act (CCCFA) may have been rolled back, banks still consider these costs when evaluating loan applications,” he explains. Lower such expenses, higher the loan amount, you can get.
2. Lower credit card limits
Although good credit card management can work in your favour, Aseem notes that your credit limit will be included as a discretionary expense.
“Banks will calculate 3 to 5% of your credit card limit as a mandatory expense. So, when applying for a home loan, keep it to the bare minimum.”
By reducing your credit card limit to the minimum, you became eligible for higher amount of loan.
3. Consolidate/ repay short term loans including hire purchases if you have any:
If you have any such short-term loans or hire purchases or personal loans, try either to consolidate or reduce it to minimum or repay the same if possible. Minimum repayment for such loans/ hire purchases makes you eligible for higher amount of loan to but your house.
4. Explore side income streams
If your current salary doesn’t meet the threshold for the loan you need, why not apply for a part-time job to supplement your income? Ideally, the side hustle should be permanent to show reliable and consistent earnings. Aseem says that many of his clients have successfully used an extra source of income to increase their borrowing capacity. If the proposed property size is such that you can keep boarder/ flat mates and can earn extra rental income, please do so because such extra income also helps to get more loan to enable to buy a house which you prefer to buy and make you comfortable in making loan repayments easily.
5. Combined salary/ wages income of the joint borrower before tax is $150K or less per year
Kainga Ora is also supporting those borrowers which has a joint income of $150K per year, to borrow maximum possible amount even you have just 5% deposits from any source to enable you to buy your dream house for own living. For more information, you can contact aseem@globalfinance.co.nz or ring 09 255 5500
6. Compare loan approval terms and conditions
These days, we can’t assume loan approval rates are uniform across all banks. Aseem says there can be differences between New Zealand banks. Each bank has own set of criteria, risk assessments and internal policies that dictate how much the lender is willing to lend to a prospective homeowner. Factors such as your creditworthiness, income stability and financial history are all taken into account.
“Right now, loan approvals between banks differ This means you might be able to borrow more by shopping around, “and even on better terms and conditions explains Aseem.
7. Sealing the deal
Securing a good home loan on a lower income might seem challenging, but armed with the right advice and strategy, it can be within reach. By trimming expenses, managing credit wisely, exploring a side income, and comparing bank offerings, you’ll be well on your way not only to maximising your loan amount but also getting better terms and conditions such as lower rate of interest, higher cash back etc.
Get personalised financial advice and secure your dream home. Get in touch with the experts at Global Finance today.
The information and articles published are true to the best of the Global Finance Services Ltd knowledge. Since the information provided in this blog is of general nature and is not intended to be personalized financial advice. We encourage you to seek Financial advice which is personalized depending on your needs, goals, and circumstances before making any financial decision. No person or persons who rely directly or indirectly upon information contained in this article may hold Global Financial Services Ltd or its employees liable.