As a Mortgage broker, I have seen first-hand the importance of financial planning in maximising borrowing capacity. When clients come to me seeking a mortgage, I make sure to educate them on the role that financial planning plays in the process.
Financial planning is the process of managing your finances to meet your financial goals. This includes budgeting, saving, investing, and managing debt. When it comes to borrowing money, lenders will assess your financial situation to determine your borrowing capacity.
As a mortgage broker, I have seen many clients who were not prepared for the borrowing process. They didn’t have a clear understanding of their financial situation or their borrowing capacity. This can lead to disappointment when they are unable to secure the loan they need.
Here are some key factors that I consider when assessing my client’s borrowing capacity:
1. Income
The first thing that I look at is my client’s income. This includes their salary, wages, and any other income streams they may have. Lenders want to see that my clients have a stable and reliable income to repay the loan.
2. Expenses
I also look at my client’s expenses to determine their borrowing capacity. This includes their living expenses, such as rent, utilities, groceries, and other bills. Lenders want to see that my clients have enough income to cover their expenses as well as their loan repayments.
3. Credit history
Another important factor is my client’s credit history. This includes their credit score, which is a measure of their creditworthiness. Lenders want to see that my clients have a good credit history with a track record of repaying debts on time.
4. Assets
Finally, I consider my client’s assets when assessing their borrowing capacity. This includes any property they own, as well as other assets such as shares, investments, and savings. Lenders want to see that my clients have a solid financial position and that they have assets that can be used as security for the loan.
So, how does financial planning help maximise borrowing capacity?
1. Budgeting
Financial planning involves creating a budget to manage your income and expenses. By creating a budget, my clients can identify areas where they can cut back on expenses and save more money. This can help increase their borrowing capacity by showing lenders that they have a solid financial position and can afford to make loan repayments.
2. Debt management
Financial planning also involves managing debt. This includes paying off any existing debts and avoiding taking on new debt. By reducing debt, my clients can improve their borrowing capacity by showing lenders that they are a low-risk borrower.
3. Saving
Financial planning also involves saving money for emergencies and future expenses. By saving money, my clients can improve their borrowing capacity by showing lenders that they have a solid financial position and can afford to make loan repayments.
4. Investment
Finally, financial planning also involves investing money to grow wealth. By investing, my clients can increase their borrowing capacity by showing lenders that they have assets that can be used as security for the loan.
As a mortgage broker, I understand that financial planning can seem overwhelming and time-consuming. However, I believe that it is essential to help my clients secure the best possible mortgage for their needs. By working together, we can create a financial plan that helps them achieve their financial goals and maximise their borrowing capacity.
I believe it’s vital to educate my clients about the importance of financial planning in maximising your borrowing capacity. By helping you to understand the role of financial planning in the borrowing process, you can make informed decisions about how much you can afford to borrow and how to best use your borrowing capacity. Get a consultation now!
