If you’ve found the home of your dreams, but reality says you can’t borrow enough to buy it, don’t give up hope yet. Here are a few tips to consider that could get you the keys to that door sooner than you thought.
Get rid of debt
When a lender assesses how much you are eligible to borrow, they will include any kind of debt you have. In simple terms, the more debt you have, the less you can borrow. This is because the lender needs to know you’ll be able to make repayments on a home loan, as well as everything else you need to make payments for.
Most lenders will include:
Credit Card limits
The more you can pay off your debts, the more you’ll be able to borrow. It’s a great incentive to get rid of those credit cards!
Find the lowest fees
Fees, charges and other start up costs often catch people by suprise when they start looking into buying a home. There’s a whole range of fees lenders charge to cover the costs involved with setting up a loan, and you’ll need to have money to cover these upfront.
Two of the biggest fees are stamp duty and Lenders Mortgage Insurance. If you can find ways to minimise how much you pay on these fees, you’ll have more to put toward your deposit and, hopefully, be closer to buying the home you want.
Consider the alternative
Stamp duty is a state government fee associated with buying existing property. If you choose to build, even if it’s off the plan, you only pay stamp duty on the land, which could save you thousands
Lenders Mortgage Insurance (LMI) is charged by many lenders to insure them against any losses if you default on your loan. It doesn’t have any benefit for you, and can cost thousands of dollars. One way to avoid paying LMI is to save for a bigger deposit. Generally, if you have 20% or more deposit, you won’t be charged LMI. You can also consider HomeStart. HomeStart doesn’t charge LMI, instead we have a Loan Provision Charge which is generally much less for most customers.
If you want to borrow more, there are options which can increase your borrowing power.
At HomeStart, our Advantage Loan
can help people on lower incomes with an additional low interest loan, on top of a standard HomeStart loan.
Watch how HomeStart's Advantage Loan helped Nyssa to borrow more.
We also have the Breakthrough Loan
, which can increase how much you can borrow by up to 30%. This is made possible through a shared equity arrangement with HomeStart, which means you share a portion of your home’s change in value when it is sold.