Can The Clients Borrow More If They Have a Bigger Deposit?

Deposit amounts do not only affect your client’s borrowing power, but they can also save them thousands of dollars in the long run. A large deposit will allow a borrower to borrow less money, have more equity, and show brokers their ability to successfully save and manage their money. A large deposit is generally 25% or more of the property value and has the potential to lower the loan-to-value ratio by lowering the price of monthly mortgage repayments. 

Encouraging your clients to save for larger deposits is a great way for them to increase their borrowing capacity potential. It is important for brokers and lenders to remember that there are a wide variety of factors that can influence their client’s borrowing capacity, including the following:

1. Living expenses and debts
2. Property value
3. Deposit amount
4. Home-loan type
5. Income
6. Credit history
7. Assets

In short, suggesting that your clients save for a larger deposit to increase their borrowing capacity is highly recommended. Though it can take a longer time for clients to save for a larger deposit, there are countless positive outcomes that come along with large deposits, including:

• Increased borrowing power
• Proves financially responsibility to brokers and lenders
• Increased equity
• Lowered monthly mortgage repayments
• Decreased loan-to-value ratio

If your client is looking for additional ways to increase their borrowing capacity, the closure of unused credit cards, decreasing unnecessarily high credit limits, paying off personal debts, and creating a second income stream are just a few recommendations you can offer!