Helpful info

How to increase your chances of attaining a mortgage

We’ve all been there. You’ve just found the property of your dreams and you put in an offer for the property subject to financing. Then a tense two week wait begins during which a bank employee will decide whether or not your house purchase is to proceed or not. The process is never as simple as you’d like even if the outcome is a simple yes or no. But there are some strategies you can employ to improve your chances of a fast and simple yes from the bank which we discuss below. 

1. Save towards the highest possible deposit 

It’s often the first question a bank or mortgage broker will ask you: how big is your deposit? As a general rule, most banks expect at least a 10% deposit, and often a 20% deposit depending upon your financial situation and whether it’s an investment property or an owner-occupier situation. But as a rule, your situation will always be viewed in a more positive light if you have a solid deposit saved. 


2. Reduce your discretionary cash spending

When you apply for a mortgage, you are generally asked to present your bank account statements for the previous 6-12 months so the bank can see your spending patterns. A loan assessment specialist will delve through your statements in depth to develop a picture of your monthly expenditure. And they’ll use that picture to decide whether you can handle the prospective mortgage repayments without too much stress. Knowing this in advance, it’s a sensible strategy to reduce your discretionary expenditure well in advance of your loan application. 


3. Pay down credit cards and other unnecessary debt

Many people have more credit card debt than they need for the simple reason using credit cards has become a habit. It’s a sensible strategy to pay down all unnecessary debt well in advance of applying for a mortgage as it will make you a stronger applicant. 


4. Develop a strong credit rating

All potential lenders will check your credit score when you apply for a loan. Your credit score is a number between 0 and 1200 which sums up how trustworthy you are as a borrower. Lenders use this credit score number as a key input when they decide whether to lend to applicants and how much they are prepared to lend. So it’s worth bearing in mind there are a number of things you can do to ensure you have a strong credit rating – for example:

  • Pay your bills on time;
  • Avoid credit cards and unnecessary loans;
  • Pay off outstanding credit card debt and loans;
  • Pay monthly loan repayments on time;
  • Maintain a credit limit well above your usual credit balance.


5. Consolidate your debt

Consolidating your debt can help present your financial position in a clearer light to potential lenders. And if you consolidate your debt into one loan with a lower interest rate, you’ll be saving on interest expenses which should also help improve your borrowing prospects when applying for a mortgage. 


Landen’s Director Jim Dionysatos believes working with the banks to make their jobs easier is the key to mortgage application success: 

‘In this era of low interest rates many of our clients are using cheap debt to their long term advantage. And they are getting good at securing attractive funding quickly by developing strong relationships with leading mortgage brokers, as well as with the banks themselves. They are presenting their financial situations to potential lenders in a way which they can easily understand and act upon. And by talking the banks’ language, the whole loan approval process becomes smoother and faster. With interest rates as low as they are, this is a great opportunity for property buyers.’