When calculating your borrowing power, one factor that impacts how much you’ll be able to borrow is your existing debt.
What is debt?
Debt is any money owed and typically is a contractual agreement between a credit provider & yourself. It can be either secured or unsecured. Examples include:
Existing home loans including owner occupied or investment.
Credit Cards – maximum credit limit is taken into account.
Other loans including personal, car, business and margin loans.
Line of Credit
How does it impact my borrowing power?
Your existing debt and the repayment obligations factored into your monthly expenditure, and alongside your income, it helps lenders determine whether you’ll be able to afford repayments on your new home loan. The higher your existing repayments and debt, the less you’ll potentially be able to borrow.
How can I reduce my existing debt?
Depending on what kind of debt you have, you can:
Pay off high interest debt
Consolidate your debts into one lower-interest loan
Negotiate for lower interest rates or payment plans
Reduce credit limits on existing credit cards.
Learn more about how to increase your borrowing power here.