You’ve decided you want to build wealth and generate revenue through property investing. You have a residential property but you don’t have enough money for a deposit on a second property.

Does that mean you have to give up your dream of buying an investment property?
If you want to build a property portfolio how can you increase your borrowing capacity?

Step 1. Improve Your Credit Score
You always pay your bills on time so how come you have a bad credit score? Banks consider many things when giving you a credit score. Do you steal from Paul to pay Peter? Banks can tell if you regularly transfer funds between credit cards each month.
Lenders also base your credit score and subsequent borrowing capacity on credit inquiries and will get suspicious if they see on your report that you’ve shopped around a lot for finance. Even if you applied for credit and didn’t get it, the enquiry still shows up on your record.

Finally, credit scores also take into account your net worth. If you haven’t accumulated any assets, having enough equity and a strong servicing capacity isn’t going to help.
If you want to know what your credit file looks like, get a free copy of your credit report at mycreditfile.com.au.

Step 2. Increase Your Servicing Capacity
Maximize your borrowing capacity by ensuring your expenses don’t exceed your income. Lenders want to know that if something happens, like a tenant leaves your rental property, that you can still service the loan.

Another way to show the banks that you are not a liability is by getting rid of all your personal loans and credit cards. Even if you currently don’t owe anything on your credit cards, a lender will look at the amount of credit available to you as a lending liability.

Step 3. Use your Equity
Can you still get approved for a mortgage on an investment property even with no down payment? Yes, you just need to unlock the equity in your home by refinancing or topping up your current mortgage.

Home improvements and renovations are also a great way to increase the value of your home to help build up equity. “Investing in property is a great way increase your net worth and build a little retirement nest egg.” Says Npis Staff of NPIS. But if the banks aren’t willing to lend you money then you won’t get anywhere until you somehow increase your borrowing capacity.