Financial Habits That Can Help Improve Your Borrowing Power
Buying a home is an exciting milestone, but before you start attending inspections or comparing lenders, it's important to understand how your everyday financial habits can affect your borrowing power.
Lenders don't just look at your income—they also assess how you manage your money. Your savings habits, existing debts, spending patterns, and overall financial position all help determine how much you may be able to borrow.
Whether you're planning to buy in the next few months or a few years from now, developing healthy financial habits can help strengthen your home loan application.
1. Build Genuine Savings
One of the first things lenders like to see is a consistent savings history. Regularly setting money aside demonstrates financial discipline and shows you're capable of managing ongoing mortgage repayments.
Rather than making one large deposit before applying, aim to save consistently over several months.
Why it matters
Demonstrates responsible money management.
Shows you can comfortably live within your income.
Helps cover your deposit, stamp duty, and other upfront costs.
Provides a financial buffer after settlement.
Tip: Set up an automatic transfer into a dedicated savings account each payday to build your deposit without thinking about it.
2. Reduce Existing Debt
Every financial commitment you have reduces your borrowing capacity. This includes:
Credit cards
Personal loans
Car loans
Buy Now Pay Later accounts
Interest-free finance
Overdrafts
Even if you don't owe money on your credit card, lenders generally assess the full approved credit limit rather than the current balance.
Reducing or closing unnecessary debts before applying may improve your borrowing position.
3. Maintain a Healthy Monthly Surplus
Lenders want to see that you're living within your means.
A monthly surplus means your income is greater than your expenses after all bills and repayments have been paid.
The larger and more consistent your surplus, the stronger your application may appear.
If you're struggling to save, consider reviewing:
Subscription services
Dining out
Online shopping
Entertainment spending
Unnecessary direct debits
Small changes often make a significant difference over time.
4. Avoid Missed Payments
Your repayment history is one of the most important parts of your credit profile.
Late payments on loans, credit cards, utilities, or phone bills may affect your credit score and how lenders assess your application.
Setting up automatic payments or reminders can help ensure your accounts are paid on time.
5. Keep Your Bank Statements Clean
Most lenders will review your recent bank statements as part of the application process.
They may look for:
Regular income
Consistent savings
Responsible spending habits
Gambling transactions
Dishonoured payments
Frequent overdrafts
While everyone spends money differently, maintaining healthy banking habits can present a stronger financial picture.
6. Avoid Taking on New Debt
If you're planning to buy a home within the next 6 to 12 months, think carefully before financing a new car, increasing your credit card limit, or applying for additional loans.
Every new commitment can reduce your borrowing capacity and may affect your home loan approval.
Whenever possible, delay major purchases until after your home loan has settled.
7. Know Your Borrowing Power Early
Many buyers spend months looking at properties without knowing what they can actually afford.
Speaking with a mortgage broker early allows you to:
Estimate your borrowing capacity.
Identify areas that may improve your application.
Understand your deposit requirements.
Explore government grants and schemes.
Develop a personalised plan to become loan ready.
Getting advice early can save time, reduce stress, and help you buy with confidence.
Frequently Asked Questions
Does my spending affect my home loan application?
Yes. Lenders review your living expenses and spending patterns to determine whether you can comfortably afford loan repayments.
Do credit cards reduce borrowing power?
Yes. Even if your balance is $0, lenders generally assess the full approved credit limit as an ongoing commitment.
How much deposit do I need?
While some buyers have a 20% deposit, many eligible borrowers can purchase with as little as a 5% deposit—and in some cases even less through certain government schemes.
Should I pay off debt before applying?
Reducing existing debt may improve your borrowing capacity, but everyone's situation is different. A mortgage broker can help determine the best strategy based on your circumstances.
Ready to Improve Your Borrowing Power?
Whether you're buying your first home, upgrading, investing, or simply planning ahead, understanding your borrowing power is the first step.
At Nexus Loans, we compare hundreds of home loan options from a wide range of lenders to help you find the right solution for your circumstances. We'll also identify practical ways to strengthen your application before you apply.
Book a free strategy session today and let's create a plan to get you home sooner.
