How to Increase Your Borrowing Capacity (Without Earning More)

If you’ve ever been surprised by how much a bank is willing to lend you, you’re not alone.

Many people assume their income is the main factor. But in reality, your borrowing capacity is determined not just by your income, but by your other debts, your savings and your spending habits. This is how lenders review your situation and each lender has their own way of assessing your application and eligibility for a loan.

Some lenders use different assessment rates, consider longer loan terms (like 40 years), or take a more flexible view of your financial position. This can mean one lender may approve significantly more than another.

Let’s look at how your current debts and liabilities can impact your borrowing capacity and what you can do to improve it. And if you’ve recently been turned down by a lender, the good news is that there are practical ways to improve your financial position.

The hidden impact of everyday debt

Here’s a typical scenario:

You’re earning well. You’ve saved a deposit and you feel ready to take on further debt.

But when you submit your application, the bank comes back lower than expected.

Why?

Because:

• Multiple small debts are stacked together
• Credit card limits are higher than needed
• Ongoing repayments reduce your serviceability

You can afford the loan in real life – but on paper, it doesn’t quite stack up.

This is where most people get caught out. You may have small, manageable debts that you’re handling easily but these can reduce your borrowing capacity more than you think.

For example:

• A $20,000 credit card limit could reduce your borrowing capacity by around $70,000
• Buy Now Pay Later services like Afterpay and Zip Pay are still considered liabilities
• Personal loans and car finance will also reduce your potential loan amount

Even if you’re managing repayments easily, lenders look at the potential risk, not just what you’re currently paying.

What you can do right now to improve your financial position

Aligning your spending behaviour to your longer-term plan is important if your goal is to buy a home or investment property. Your financial structure needs to support that goal.

That might mean making a short-term change in priorities.

Have a look at all your current debts and ask yourself:

• Do I really need this credit card limit?
• Are these small debts helping me, or holding me back?
• What would change if I cleared them in the next 3 months?

Answering these questions honestly will help you think more strategically and less reactively about your future. If you’re serious about increasing your borrowing capacity, here are some simple and effective steps:

1. Reduce or close unused credit cards
Even unused limits count against you.

2. Clear “Buy Now Pay Later” accounts
They may feel small, but lenders treat them seriously.

3. Pay down personal debts
This can quickly improve your position.

4. Avoid taking on new liabilities
Hold off on new finance or credit cards if you’re planning to apply soon.

5. Get the right lending strategy
Different lenders have different outcomes. With access to over 50 lenders and an unbiased approach, I’ll help you find the right lender with the right loan so that you’re not paying any more than you have to.

Taking some steps to reduce your spending and liabilities isn’t about cutting everything out or putting your life on hold. It’s about making a few smart adjustments so you can move forward without compromising on the property you really want.

My approach is always about practical advice, tailored to your financial situation and lifestyle, with a long-term view in mind.

Let’s catch up for a 15-minute strategy session

If you’re not sure where you stand, the best place to start is with a conversation. As a mortgage broker, I’m here to help you create a stronger financial position so that you get the right loan to secure the property you want, and ultimately save you time and money. I have access to over 50 lenders which means I understand who is more likely to accept your loan application. Let’s do a simple audit of your financial position and borrowing capacity, and map out a plan from there.

Call me for a free 15-minute strategy session on 0430 511 500 or email me at glen@keystonemortgagebrokers.com.au to arrange a time.