Previously known as “The Property Planner, Buyer and Professor”
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Show Notes – How to Increase Borrowing Power
1. The Impact of Kids on Borrowing Power
- Each dependent significantly increases assessed living expenses, slashing borrowing capacity.
- Example: Two kids could reduce your borrowing power by $70,000–$140,000.
- Private school fees? Expect even steeper reductions—up to $560,000.
- Cate and Dave also unpack how single parents are impacted even more, due to higher cost assumptions under the Household Expenditure Measure (HEM).
2. The Cash Rate Effect
- A 0.25% rate cut can increase borrowing power by $20K–$35K.
- Three more cuts? That could add $75K–$150K to your loan capacity.
- Dave and Mike break down how this unlocks more expensive properties—and why it may drive price growth in the near term.
3. Boosting Income to Boost Borrowing Power
- A $10,000 salary increase = ~$51,000 more borrowing power.
- Couples may see similar proportional gains, depending on who gets the raise.
- But beware the tax threshold: once incomes exceed $190K, marginal tax rates reduce the benefit.
4. Base Salary vs. Bonus Income
- Lenders treat base salary as stable—most count 100% of it.
- Bonus, commission and overtime income is usually shaded (75–80%) and assessed based on 1–2 years of history.
- Income like higher duties or overtime in fields like healthcare and emergency services may be counted more favourably—but it varies widely between lenders.
5. Should You Wait for a Promotion?
- If you’re close to a raise, it may be worth the wait.
- But in a rising market, waiting 6 months could mean paying $25,000+ more for the same property.
- Dave’s verdict: Get pre-approval now, and update when your pay rises—be ready to act.
6. Parental Leave and Return-to-Work Scenarios
- Some lenders will use your future income if you can provide a return-to-work letter.
- Variable income (like bonuses) may not be included unless you’ve been back long enough to demonstrate consistency.
Resources:
- 34 No mortgage strategy – No.4 of the top 7 Critical Mistakes
- 115 How much can I borrow? How borrowing capacity can be impacted, massaged and manipulated (without breaking the rules of course!)
- 116 How to increase your borrowing power – Learn how investors, first home buyers and upgraders increase capacity
- 191 Risk management and the things that can go wrong when mortgage strategy is ineffective
- 234 Unveiling the Secrets of Elite Strategic Mortgage Brokers – Navigating Advice, Skills, Results, Relationships & Regulations!
