Can mortgage brokers get you a bigger mortgage?

Borrowing capacity is one of the first things anyone wants to know when considering a mortgage.

How much can I borrow is a top Google search term and many people tap into the online mortgage calculators to understand how much they can borrow.

However, as I’ve discussed previously, an online mortgage calculator will only give you a rough guide on your capacity.

Real Estate Mortgage Loans And Paperwork

As such, many borrowers turn to a mortgage broker to maximise the amount they can borrow, or to ensure they are getting the best home loan for themselves.

In 2019, the Mortgage and Finance Association of Australia estimated that mortgage brokers claimed almost 60 per cent of the home loan market.

On average, mortgage brokers have around 34 lenders on their panel – that’s 34 different financial institutions that can lend money for a mortgage.

Each lender may offer multiple products and it’s the mortgage broker’s role to understand all these products and how they may best suit the borrower.

“It is this additional choice (in lending products) that adds competition in the market,” a 2018 Deloitte report, ‘The Value of Mortgage Broking’, states.

The popularity of mortgage brokers stems from the fact that they provide a valuable service – helping customers to choose the best loan for their unique situation.

A mortgage broker knows a vast array of products from the myriad lenders in Australia (not just the big four), far more than most people have time to research when beginning their home loan journey.

And so, a trusted expert advisor, the mortgage broker, is a valuable tool for more than half of all Australian borrowers.

Brokers and borrowing capacity

Mortgage brokers have expertise across many financial products on the market and this means they can help with loan application details that may result in increased borrowing capacity.

googletag.cmd.push(function() { googletag.display(‘div-gpt-ad-1612269270436-0’); });

Additionally, and perhaps most importantly, a mortgage broker can negotiate and has established relationships with lenders.

Think of a mortgage broker as your person on the inside, someone who knows the labyrinthine ways of the financial world.

They know how to push and pull, to tweak and tug, to get the best result and the best outcome for the client.

A mortgage broker can also advise you on things to do that will improve your borrowing capacity. Such things may include:

Deposit: Increasing your deposit to more than five per cent will obviate the need for Lenders’ Mortgage Insurance (LMI) which is an added cost. By increasing your deposit to, say 20 per cent of the purchase price, you can demonstrate stronger savings history, better financial security and, to be blunt, that you are a ‘safer bet’ for the bank to lend money to.
Credit score: Take steps to improve your credit score. This means pay your bills on time, especially those that are more than $150. If you default on your bills and are, say, at least 60 days overdue, a default can be listed on your credit report. A default will stay on your credit report for five years. Automatic payments from your bank account will help avoid late payments. You should also check your credit report for any inaccuracies before you apply for a loan. Your mortgage broker can help you access your credit report, or simply visit Canstar’s Credit Score Information Hub.
Reduce costs: This advice will include measures such as reducing your credit card limits. Note, reducing the limit, rather than reducing the balance, means reducing the total amount you can spend on each card, say reducing the limit from $5000 down to $2000. When assessing borrowing capacity, lenders will typically assume that credit cards are maxed out. It is also incorrect to believe that you need a credit card to get a credit score. If you can get rid of your credit cards, particularly if you have trouble making payments, this is a sound financial step.
Limit any other credit applications: Any time you borrow money it is recorded on your credit rating. Even if you don’t go ahead with the loan, the application is recorded as a credit inquiry and could affect your rating, so think carefully before applying for additional credit.
Service capacity: It’s a simple concept but increasing your income will likely boost borrowing capacity. It can be challenging to ask for a raise, however, it is worth thinking about as one way you can increase household revenue (without increasing costs).

Houses Of Different Size With Different Value On Stacks Of Coins. Concept Of Property, Mortgage And Real Estate Investment.The most crucial thing to understand when thinking about borrowing capacity is the impact it will have on your life.

Don’t borrow so much that you will be undertaking austere measures and living extremely frugally.

This is not sustainable.

A qualified, expert mortgage broker will be able to direct on you how much you can safely borrow to achieve your dream of homeownership.

They will be able to guide you through the process and ensure that you are borrowing the maximum amount that will suit you and your goals.

googletag.cmd.push(function() { googletag.display(‘div-gpt-ad-1592314976732-0’); });

Read more: