Improve your borrowing power

Improve your borrowing power

You may be in the process of saving for your first home, or perhaps you have paid of all or most of your home and decided to upgrade to a newer and bigger property. For either to occur the state of your finances should of utmost importance. The reason is that banks will determine how much you can realistically borrow based on this information, so before you decide to move further ensure there is no hidden debts that may hinder your loan application. You should also ensure the asset you are about to be has a property inspection or building inspection report whether you are in Sydney, Melbourne or any other area of the country. Australian Property Building Inspections have offices located across the country should you require a pre-auction report prior to making your property purchase.

As Australians have some of the highest levels of personal debt in the world we also need to be mindful whether this debt is good or bad debt and as most Australians debt is for home loans the percentage of personal debt compared to the rest of the world isn’t so bad after all, especially also considering the cost of housing in this country is amongst the most expensive in the world.

How to manage Household debt

The average national debt for individuals is difficult to ascertain, some of us may have a higher level of debt based on where we live, however we may also earn more to service that debt, but the only aspect we need to worry about is how to manage this debt.

• Possibly the best move you can make and to help keep track of your debts is to consolidate all your debts into the one account. Not only does this make keeping track of your debts easier but can also mean you only need to pay one interest rate and often at the lower end of the scale. Many credit card companies will offer 0% Transfer fee for example and where possible should be taken advantage of.
• As savings are a vital element to your household’s overall finances it is important to set up a regular savings account. This not only shows the banks you are able to save regularly but also helps to act as a safety net should an unexpected bill land at your door. It also helps add wealth to the household plus stops your from going into any unnecessary loans or bad debts.
• Set yourself a budget as this is a useful tool to determine the money that comes into the household vs the money that goes out of all your accounts, it also offers a clear path of what debts you have and how to service them. There are many free budgeting tools available online that can be tailored for your household. A budget also gives you clear direction and focus to help achieve your goals quicker.

Be mindful of easy-access credit cards that may attract interest rates of up to 30% per annum, and this could have serious impact on your ability to repay the debt on time. Another type of card to be aware of are Store cards as these don't really have a purpose, other than to generate profits for the stores involved.

Although Australia has some of the highest personal debts in the world compared to most, if you can continue to service your debt, most likely investments including your home, you should be better off in the long run.