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What to do if the bank won’t lend you as much as you want

Woman working out how much she can borrow.

So you’ve got your sights set on a home, spoken to a bank, and gotten an idea of how much you can borrow. The only problem is the amount is a bit lower than you’d like. Thankfully, there are a few things you can do to boost your borrowing power.

First of all, what is borrowing power?

Put simply, your borrowing power is the amount that a bank is willing to lend you. If you’re on solid financial footing and can show you’re responsible with your money, banks will be much more comfortable lending you the amount you want.

To determine your borrowing power, your lender will take into account your income, living expenses, and any other financial commitments you might have. They will also scan your credit history for signs that you can be trusted to pay off your debts on time.

Will different banks lend you different amounts?

Lenders assess applicants in different ways, which means the amount you can borrow will vary depending on who you talk to. You can test this by trying out the borrowing calculators on different banks’ websites and seeing how the results vary.

If the difference between two lenders is significant, they might have different protocols around debt-to-income ratios (DTI). 

Your DTI is the sum of your debts and liabilities divided by your gross income. For example, if both you and your partner earn $60,000 per year and want to take out a home loan of $500,000, your lender will calculate your DTI using the following formula:

  • $500,000 ÷ $120,000 = DTI of 4.2

Banks set their own caps on DTI ratios for borrowers, which means that the amount different banks might be willing to lend you can vary by an entire year’s salary.

Other reasons might be at play too. For example, newer lenders tend to exercise more caution when assessing potential borrowers. That’s because a customer defaulting on their loan will have much more of an impact on a smaller lender than a larger, more established one.

What can I do if I can’t borrow enough?

Your borrowing power, as determined by a particular lender, isn’t set in stone. Here are a few things prospective homebuyers can do to increase it: 

  • Increase your income
  • Cut back on expenses
  • Pay off any debts
  • Reduce your credit limits
  • Check your credit report for mistakes
  • Save a larger deposit
  • Try a different lender
  • Co-borrow with a parent

Increase your income

This is one of the most obvious ways to boost your borrowing power, but by no means the easiest. If possible, ask your employer for a raise, apply for a higher paying job, or consider taking on a second job.

Cut back on expenses

Your lender will want to see recent bank statements to get an idea of where your money is going each month. If you can rein in your spending (cancelling idle subscriptions and shopping around for better deals on utilities are a good place to start), it can raise your standing in banks’ eyes.

Pay off any debts

If your existing debts are excessive, lenders will be reluctant to saddle you with much more. Try to pay off your credit card in full during the interest-free period, and tackle any other debts you have so they don’t snowball any further. 

Reduce your credit limits

When calculating your borrowing power, lenders will assume your credit cards are usually drawn to their full limit, so try to lower your credit limits where you can. And if you have any unused cards it’s a good idea to cancel them altogether.

Check your credit report for mistakes

Obtain a copy of your credit report and check it for any errors that could be influencing your bank’s assessment of you. If there are inaccuracies or listings you can contest, you should contact your bank (and subsequently the credit reporting body) to set the record straight.

Note: In Australia, you can request a free copy of your report once every 12 months from a credit reporting body (such as Equifax, Experian and CheckYourCredit).

Save a larger deposit

There are plenty of benefits to having a larger deposit, including smaller monthly repayments and being less vulnerable to interest rate hikes. But it also signals to your lender that you can set aside enough money each month to service a mortgage.

Try a different lender

If the amount one bank is willing to lend you falls slightly short of your expectations, it might be worth chatting with another bank to see if they are willing to go higher. As mentioned above, lenders approach risk assessment in different ways and some may be less strict than others.

Co-borrow with a parent

Two sets of income will inspire much more confidence in your lender than just one. If a parent is willing to put their name on your mortgage application, it can go a long way towards helping you qualify for the loan you want. Just keep in mind that if your parents already own a home, you won't be eligible for any stamp duty concessions available to first home buyers

What if my home loan application was rejected?

If your home loan application was rejected outright, it means that your lender does not believe you would be able to service a mortgage without falling into financial hardship.

Whether they identified red flags on your credit report or the loan you requested just wasn’t suitable given your current income and savings, you’ll need to make some big changes before you can re-apply.

Focus on improving your credit score by paying your bills on time, keeping credit card balances low, and only applying for credit when you really need it. 

A budget can also help by giving you a picture of how much money is coming and going each month. From there, you can identify and eliminate any unnecessary expenses and boost your savings over time. 

For more tips, browse our home loan serviceability guide. And if you’re unsure where to start when it comes to finding a loan, visit our home loans comparison page for a look at what’s available.

Mozo may receive payment if you click the products below. We don’t compare the entire market, but you can search our database of 473 home loans.
Last updated 22 June 2024 Important disclosures and comparison rate warning*
  • Basic Home Loan

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    fixed 3 years
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  • Variable Home Loan 90

    Principal and Interest, LVR <90%

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    6.04% p.a. variable
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    Affordable home loan rate for buyers or refinancers. No monthly or ongoing fees. Option to add an offset for 0.10%. Access to savings with unlimited redraws available. Minimum 10% deposit required.

  • The Better Home Loan Special Offer

    Owner Occupier, Principal & Interest, LVR<80%

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    6.14% p.a. variable
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    Enjoy a variable rate home loan with a bunch of features from Police Credit Union. Make extra repayments at any time without penalty. No monthly, annual or upfront fees. Free online redraw. Minimum 20% deposit. Qualifying criteria applies. Minimum loan amount is 200K. For new customers only. Mozo Experts Choice Home Lender Credit Union of the Year 2023.

  • Discount Variable Home Loan

    Owner Occupier, LVR<70%

    interest rate
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    5.99% p.a. variable
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    A low rate home loan for owner-occupiers packed with great features including unlimited extra repayments, free online redraw, no application or monthly admin fees. Rate will vary depending on LVR. Winner of a Mozo Experts Choice 2024 Low Cost Home Loan Award^

Niko Iliakis
Niko Iliakis
Money writer

Niko Iliakis is a finance journalist at Mozo specialising in home loans, property and interest rate movements. With an eye for facts and figures, Niko deep-dives into topics to help readers understand key info and make more informed financial decisions. He is ASIC RG146 (Tier 2) certified for general advice.

* WARNING: This comparison rate applies only to the example or examples given. Different amounts and terms will result in different comparison rates. Costs such as redraw fees or early repayment fees, and cost savings such as fee waivers, are not included in the comparison rate but may influence the cost of the loan. The comparison rate displayed is for a secured loan with monthly principal and interest repayments for $150,000 over 25 years.

** Initial monthly repayment figures are estimates only, based on the advertised rate. You can change the loan amount and term in the input boxes at the top of this table. Rates, fees and charges and therefore the total cost of the loan may vary depending on your loan amount, loan term, and credit history. Actual repayments will depend on your individual circumstances and interest rate changes.

^See information about the Mozo Experts Choice Home Loan Awards

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