How to boost your borrowing power when applying for a home loan

With interest rates stabilising and property prices continuing to grind higher across most Australian capitals, boosting your borrowing power can make the difference between cracking into the market now or waiting years.

Here's a practical, no-nonsense guide to increasing your borrowing capacity in today's lending environment.

1. Reduce your existing debts - even the small ones

Banks look closely at your current financial obligations when deciding how much you can borrow.

That includes credit card limits, Buy Now Pay Later accounts, personal loans, HECS/HELP debt, and car finance.

What many don't realise is that lenders assess your credit card limit, not your balance.

So if you have a $10,000 credit card limit but only owe $300, the bank still treats it as if it could become a $10,000 debt overnight.

Quick win:

Reduce credit card limits to what you actually need.

Close any unused accounts.

Pay down personal loans or car finance if possible.

Every cut to your monthly outgoing expenses directly boosts your borrowing power.

2. Tighten your spending for three months before applying

Most lenders now review three to six months of bank statements to gauge your real-life spending habits. That includes discretionary spending like eating out, shopping, entertainment, subscriptions and Uber habits.

This is not the time for chaotic Afterpay cycles or big impulse buys.

To help your application:

Cut unnecessary discretionary spending 90 days before applying.

Cancel unused subscriptions.

Be consistent with savings deposits to demonstrate financial discipline.

A cleaner spending profile can add tens of thousands to your borrowing capacity.

3. Increase your income - even modestly

You don't need a major career jump to improve your borrowing power. Even small income increases can help.

Consider:

Taking on a few extra shifts or freelance work.

Asking for a raise if you're due for a review.

Having your partner included in the loan application (if appropriate).

Banks use your gross income in their calculations, so every bump helps. If you've recently changed jobs, most lenders require you to be at least three months into your new role, so timing matters.

4. Boost your deposit through government schemes

Australia's first-home buyer landscape is packed with incentives that can directly or indirectly increase how much you can borrow by lowering your upfront hurdles.

Key programs include:

Help to Buy Scheme (shared equity): Allows eligible buyers to purchase with a much smaller mortgage, as the government takes an equity share.

First Home Guarantee:Buy with as little as 5% deposit without paying lenders mortgage insurance (LMI).

Regional First Home Buyer Guarantee:Similar benefits but for regional areas.

First Home Super Saver Scheme: Lets you save for a deposit inside your super at a lower tax rate.

These programs don't change your borrowing capacity on paper - but they can get you into the market sooner by reducing deposit requirements or lowering repayments.

5. Improve your credit score

Your credit score gives lenders confidence you can manage debt responsibly. A higher score can open the door to more lenders, better products and potentially higher borrowing capacity.

To improve yours:

Pay bills on time

Avoid multiple credit applications

Keep credit utilisation low

Fix any errors on your credit report

You can access your credit report for free through Equifax, Experian, or illion.

6. Shop around - different banks offer radically different results

Lenders don't calculate borrowing power the same way. Two banks can differ by $100,000 or more on the same application.

That's why many first-home buyers work with a mortgage broker - they can compare dozens of lenders, policies and interest rate scenarios to maximise your borrowing capacity.

In a rising market, boosting your borrowing power even slightly can be the difference between buying now or being priced out later.

With a few strategic moves, cutting debts, tidying spending, checking your credit, and using government incentives - home buyers can put themselves in the strongest position to secure the loan they need.