Blog 10 income sources to increase your borrowing power

10 income sources to increase your borrowing power

25 September 2017
10 income sources to increase your borrowing power

Are you planning on buying your first home or investing in a property soon? Before you look at houses you want to purchase, you might want to work out first how much you can borrow by using our borrowing power calculator.

Your borrowing power will be mostly based on your income sources and expenses, so this lets you know the price range of houses you can afford to buy.

If you want to increase your borrowing capacity so you can buy your dream home, here are 10 extra income sources you must remember to inform your lender about.

  1. Rental Income. Do you have a rental property? Then make sure to include the profit you make from your rental property. Your borrowing power will increase because of the negative gearing benefits and the earnings you get from it.
  2. Bonuses. Does your company offer bonuses when you hit a quota or target sales? Lenders will also take into account the bonuses you get as another source of income, aside from your basic salary.
  3. Commissions. If you’re working in sales, or working in a steady commission-based job, you can also add this when you apply for a home loan.
  4. Allowances. Do you receive allowances from your company such as car allowances or on-call allowances? You can also add these to your other sources of income.  
  5. Dividends. These are sums of money paid by a company to its shareholders from its profit. Having a healthy share portfolio can increase your borrowing power, so make sure to include this in your sources of income.
  6. Tax returns. Factoring in your tax returns for the last one to two years can be an additional source of income. Make sure that you have your tax return documents in order.
  7. Savings account. It really pays off to build up your savings account. So be sure to keep a good record of your savings for at least three to six months. Also, a good savings account can prove to your lender that you’re a low-risk borrower.
  8. Equity. If you have an existing property, you can use your equity in your home to improve your borrowing power. However, be sure that you have enough equity in your existing property.
  9. Royalties. Are you a musician or a writer who can claim royalties through copywriting agencies? Some lenders may consider your royalties as another source of income. Make sure that you have documents in place to prove your royalty payments are genuine.
  10. Income increase. What better way to increase your borrowing capacity than by increasing your income from your main job? You might want to ask your boss for a raise or transfer to a higher-paying company but keep in mind that changing jobs may decrease your chances of getting your loan approved depending on your application.

Other than adding new sources of income, you should also reduce your expenses to improve your borrowing power. Remember, a few financial changes will be helpful in attaining your home-buying goals.