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Even if you feel comfortable with your cash flow and debt levels, banks will ultimately judge your mortgage application based on their own measures of serviceability - not yours.

To help ensure invisible serviceability limits don’t block you from starting or expanding your property portfolio in the future, here are six strategies:

1. Reduce unnecessary credit

Even if you have a credit card with a limit of $10,000 that’s never been touched, or paid off in full each month, the banks will count this as a liability as being fully drawn when it comes to assessing your serviceability.

And for every $10,000 worth of credit that’s available to you, the bank will knock approximately $300 off the funds at your disposal to service a loan.

2. Consolidate unsecured debts

If you have a number of outstanding balances across different credit cards and/or personal loans, you might want to think about consolidating this type of unsecured debt into your mortgage or even better paying them off and closing them if achievable.

This means those hefty monthly repayments associated with high-interest credit facilities will no longer factor into the lender’s serviceability calculations, which is a good thing when you consider how heavily they can weigh against you.

3. Keep your paperwork in order

Depending on your wage structure, two payslips may not provide an accurate serviceability picture, so it’s good to ensure the lender can request a more comprehensive payment summary from the ATO. The clearer you can demonstrate your earnings, the better!

4. Shop around for the right loan

Choosing a low-rate mortgage without all the bells and whistles that mean extra bank fees can effectively lower your monthly repayments and therefore, enhance your serviceability profile.

A good mortgage broker can help you to identify loan products most suited to your needs, with features that could potentially work to increase your financial capacity, as the banks’ see it.

Importantly, mortgage brokers also know how different lenders operate when it comes to ‘unwritten rules’ around the treatment of various income streams, such as rent.

So, it pays to find the right product.

5. Extend your loan term

A longer loan term means lower monthly repayments and greater serviceability strength.  

While it takes longer to pay down debt (and costs more overall), disciplined repayments at a higher rate can help secure a favourable assessment and still allow faster payoff.

6. Save as much as you possibly can

This is the simplest strategy and entirely within your control. Building up cash or equity before buying property decreases your loan obligation and boosts serviceability.

Top-notch debt management for sustainable portfolio growth comes down to careful planning. When you get it right, property finance stress lessens and your chance to build lasting wealth through real estate grows.  

We’re here to support you in reaching your financial and life goals.

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