Five steps can make your income work harder without taking on a second job
When it comes to applying for a home loan, your income carries plenty of clout. That make sense – after all, lenders like to know you can comfortably manage loan repayments. The good news is that a few simple steps can help your income look its best.
1. Keep it stable
When you’re applying for a home loan, a reasonably stable employment history can be a plus. If you’re thinking about switching jobs or starting your own business, consider putting those plans on hold until after your loan is approved.
2. Have your income in writing
Gather as much information about your income as possible to show lenders. This includes pay slips, your contract of employment or a letter from your employer and your most recent PAYG Certificate.
3. Celebrate a pay rise
If you know a pay rise is just around the corner, consider waiting until your pay rise kicks in before applying for a loan. It could add a valuable boost to your borrowing power.
4. Trim back expenses
Lenders review both sides of your financial ledger – how much you earn; and how much you spend on living costs. If you can cut back household expenses, and demonstrate this to a lender will a clearly drafted budget, the amount of income left over for loan repayments rises.
5. Reduce other debt
Spreading your income across multiple debts isn’t just financially challenging. It can also lower the likelihood of home loan approval if a lender feels you’ll be taking on more debt than you can handle. Aiming to pay off other debts like, say, a personal loan or car loan, can work in your favour. It means your income isn’t as thinly stretched – and that’s good for you as well as your loan application.