5 Ways to Increase Your Borrowing Capacity

The higher your home loan borrowing power, the more options you could have. And the good news is, there are ways to help increase your borrowing capacity – here are five of them.

In today’s rising property market, increasing your borrowing capacity can help you access better properties, invest sooner, or simply improve your financial position. Whether you're buying your first home, upgrading, or growing your investment portfolio, lenders base your borrowing limit on a range of factors—and the good news is, many of these can be improved with the right approach.

Below are five practical, proven strategies to help boost your borrowing power—and why the right loan structure and advice from a mortgage broker can make all the difference.

1. Reduce or Eliminate Existing Debts

One of the quickest and most effective ways to increase your borrowing capacity is to pay down your existing debts.

Lenders assess your overall debt position—including credit cards, personal loans, car finance, store credit, and even buy-now-pay-later services. Even if you don’t have an outstanding balance, the credit limit of a card is still factored in as potential debt when your loan application is assessed.

For example, a credit card with a $10,000 limit—even if unused—might reduce your borrowing capacity by as much as $40,000 or more, depending on the lender.

Smart moves to consider:

• Cancel credit cards you don’t use.

• Reduce your card limits to the bare minimum needed.

• Pay off personal loans or car loans before applying for a mortgage.

Reducing liabilities frees up more of your income for mortgage repayments, improving your debt-to-income ratio and boosting the amount lenders are willing to offer you.

2. Cut Back on Living Expenses

Since the introduction of tighter responsible lending obligations, banks have increased scrutiny on how borrowers spend their money. Lenders no longer rely solely on benchmark figures—they now review 3 to 6 months of actual bank statements to verify your living expenses. This includes everything from groceries, transport, and utilities to discretionary spending like dining out, entertainment, and subscriptions.

If your goal is to maximise borrowing power, it’s wise to start monitoring and reducing your expenses in the months leading up to your loan application.

Practical tips:

• Track all your spending over 90 days to identify patterns.

• Cancel unused streaming services or subscriptions.

• Limit discretionary spending like takeaway meals, alcohol, and online shopping.

• Plan meals and shop in bulk to save on groceries.

• Consolidate services like internet and phone into one provider to cut costs.

Not only will this leave you with more cash flow each month, but it also creates a better impression with lenders that you are financially responsible—especially if you're applying for a larger loan amount.

3. Consider a Longer Loan Term

When banks assess how much you can borrow, they calculate your ability to make repayments based on a standard loan term—usually 25 or 30 years. However, if you choose to extend your loan term to the maximum (typically 30 years), your monthly repayments are lower, which in turn increases your borrowing capacity.

Let’s say you’re considering a $600,000 loan:

• Over 25 years at 6% interest, your repayments would be approx. $3,866/month.

• Over 30 years at the same rate, it drops to approx. $3,597/month.

That’s a saving of $269 per month, which may be the difference that allows a lender to approve a higher loan amount based on your income and expenses.

Caution: A longer term means you’ll pay more interest over the life of the loan. However, many borrowers choose a 30-year term initially to secure the home they want and later make extra repayments or refinance to reduce the overall interest paid.

4. Optimise Your Loan Structure

The way your loan is set up can have a significant impact on your borrowing capacity. Loan products are not one-size-fits-all—some are more flexible, some offer lower repayments, and others allow for features that can help reduce overall interest costs.

Here’s how smart loan structuring can help:

a. Principal & Interest vs Interest-Only

• Interest-only loans reduce your repayments in the short term, which can increase borrowing capacity.

• However, not all lenders allow interest-only repayments for owner-occupied properties, and some treat them less favourably in assessments.

b. Fixed vs Variable

Fixed rates can sometimes offer lower initial repayments, but lenders may assess you based on a higher “assessment rate.” Variable rate loans can be more favourably assessed in some cases.

Your mortgage broker can help you structure the loan to balance repayments, flexibility, and eligibility with different lenders.

5. Choose the Right Lender (Not Just the Big Four)

This is another option that has a big influence on your capacity to borrow. Every lender has their own credit policy, and this can have a massive effect on how much they’re willing to lend you. Borrowers often assume their own bank will offer the best deal—but that’s not always true.

Lender differences include:

• Assessment rate: This is the interest rate the bank uses to test your ability to repay. Some lenders use a 3% buffer, others use less. Lower assessment rates = higher borrowing power.

• Income treatment: Some lenders accept overtime, commissions, and allowances as income; others don't.

• Rental income: Investors can benefit from lenders that consider up to 90% of rental income.

• Household expenses: Lenders vary in how they apply household spending benchmarks, especially for large families or self-employed applicants.

• Credit score sensitivity: Some lenders are more conservative with lower credit scores or thin credit files.

  
  

This is why working with a mortgage broker is invaluable. Brokers have access to dozens of lenders—from major banks to non-bank lenders and credit unions. They can match your personal circumstances to the lender most likely to offer the highest borrowing capacity, not just the lowest advertised rate.

Bonus Tip: Speak to a Mortgage Broker Early

Many people only speak to a broker once they’ve found a property they want to buy. But the best time to engage a broker is before you start house hunting.

Why? Because a broker can:

• Conduct a borrowing capacity assessment based on your real-life situation.

• Recommend steps to improve your serviceability before applying.

• Strategise the best lender and product to suit your long-term goals.

• Help you gather documents and prepare a strong application.

By doing this groundwork early, you’ll be in a far better position to act quickly when the right property comes along—and you may even be able to afford more than you think.

Final Thoughts - 5 ways to increase your borrowing capacity

Increasing your borrowing capacity isn’t about gaming the system—it’s about understanding how lenders assess risk and demonstrating that you’re a responsible, low-risk borrower.

Here’s a quick recap of the 5 ways to boost your borrowing power:

1. Reduce your existing debts – Eliminate credit card limits and personal loans.

2. Cut back on living expenses – Minimise unnecessary spending and improve cash flow.

3. Opt for a longer loan term – Spread repayments to increase affordability.

4. Structure your loan wisely – Use features like offset, interest-only (where appropriate), or consolidation.

5. Choose the right lender – Policies differ widely; the right one can significantly improve what you can borrow.

   
   

Buying a property is one of life’s biggest financial moves. Make sure you approach it with the right plan, structure, and expert advice. An experienced mortgage broker can help you navigate these strategies, compare options, and ultimately put you in the best position to buy with confidence.