Here’s why your borrowing capacity might see an increase soon

While the politics surrounding the Stage 3 tax cuts have garnered significant attention, it's important to focus on their potential benefits. Approximately 13.6 million Australians stand to benefit from these cuts, with the amount saved depending on individual income levels.

For instance, individuals earning around the national average wage of $73,000 could see a yearly tax saving of £1,504, according to the federal government. Meanwhile, those with an income of $100,000 might expect to save £2,179 annually.

For households facing financial strain due to the cost of living in Queensland, the impending tax cuts offer a welcome relief. However, for prospective homebuyers, they could also present an unforeseen advantage: an increase in borrowing power.

What exactly is borrowing power?

Borrowing power, also known as borrowing capacity, refers to the maximum amount a lender is willing to loan you. It's determined by various factors, including your deposit size, household expenses, and after-tax income.

Generally, a higher after-tax income translates to a greater borrowing capacity, potentially enabling you to purchase a home sooner or opt for a more expensive property in Townsville, Brisbane or the Gold Coast.

The impact of tax cuts on borrowing power

According to RateCity's analysis, a single individual earning $100,000 annually could see their borrowing power rise by an additional $21,000 due to the Stage 3 tax cuts. Similarly, a couple with a combined income of $150,000 might witness their borrowing capacity increase by nearly $30,000.

This news is particularly beneficial for first-time homebuyers or those looking to upgrade their current residence.

Even if you don't intend to borrow more, the boost in your take-home pay resulting from the tax cuts could make your existing mortgage repayments more manageable.

Other strategies to enhance borrowing power

While awaiting the Stage 3 tax cuts, there are alternative methods to bolster your borrowing capacity:

1. Budget adjustments: Trimming non-essential expenses can free up additional funds to boost your deposit, potentially increasing your borrowing power.
   
2. Credit card management: Lenders assess the maximum credit card limit rather than the outstanding balance when evaluating loan eligibility. Lowering your credit limit or cancelling unnecessary cards can enhance your borrowing capacity.
   
3. Income augmentation: Increasing your income through additional work hours, negotiating a pay rise, or pursuing supplementary income streams can positively impact both your bank balance and borrowing power.
   

Determine your borrowing potential

While online calculators provide rough estimates of borrowing power, they often overlook individual circumstances and lender-specific criteria. Consulting with us allows for a more tailored assessment of your borrowing capacity based on your unique financial situation and property goals.

We'll take the time to understand your expenses and aspirations, crafting a personalised plan to help you achieve your homeownership objectives in Queensland especially in Townsville, Brisbane, or the Gold Coast.

Disclaimer: The content of this article is general and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your situation and may not be relevant to circumstances. Before taking any action, consider your particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced, or republished without prior written consent.