Here are some tips to help boost your serviceability and increase your chances of getting your loan approved:
1. Shop around – utilise a mortgage broker to help you track down the best rates and the most appropriate product available. It's not always about getting the best rate; all things considered, what benefit is it to a bank that offers a saving of 0.2%, if the bank will not approve your application?
2. Reduce your credit card limits – immediately! Credit cards will chew through your assessed serviceability, so reduce them as far as you can, or even get rid of them altogether. If you have some credit card debt pay them down, then continue reducing the available limits.
3. Eliminate personal debts – any way you can. Car loans, credit cards, personal loans, fast finance debts - pay them off as a priority (if you can afford it), then cancel the cards and accounts as you pay them off. This will free up your serviceability for the banks calculators. Alternatively, consolidate them into a single affordable monthly repayment, and cancel all of the cards and credit facilities so you don’t rack up more debt.
4. Decrease discretionary spending – Banks want to see proof of your financial reliability, so show them (at least for a few months before you submit your loan application) by reducing your discretionary spending on take out meals, clothes, gadgets, online shopping and other lifestyle expenses.
5. Refinance – look to extend your loan term on an existing loan. If you’ve had your home loan for 5 years, you can refinance the current balance over a new 30 year period. This will drop your monthly repayments, and increase your serviceability. Just make sure you keep paying the same higher monthly repayment you were previously paying, so you don’t end up paying extra (avoidable) interest.
Luke Jorgensen - Lush Property
Tags - Property Investment; Property Development; Renovation; Valuation; Valuer; First Home Buyer; Buyers Agent; Buyers Advocacy