5 Everyday Money Habits That Could Affect Your Borrowing Power

If buying a home is one of your goals over the next few years, you've probably been told to save a deposit and improve your credit score. While both are important, many first home buyers are surprised to learn that lenders also look at your existing financial commitments and spending habits when assessing a home loan application.

This doesn't mean you need to stop enjoying your daily coffee or cancel every subscription you own. Instead, understanding how lenders assess your finances can help you prepare and potentially improve your borrowing power before you apply.

Here are five common money habits that could be affecting your home loan application.

1. Buy Now Pay Later Accounts

Services like Afterpay, Zip and Klarna have become part of everyday life, especially for younger Australians. While they can be a convenient way to spread payments, lenders often treat them as ongoing credit commitments.

Even if the balance is small or nearly paid off, these accounts can impact how much you are able to borrow. If you're planning to apply for a home loan in the near future, it's worth reviewing whether you still need them.

2. High Credit Card Limits

Many people assume that if their credit card has a zero balance, it won't affect their application. However, lenders assess the available limit rather than the amount currently owing.

For example, a credit card with a $15,000 limit represents potential debt that could be accessed at any time. Reducing your limit or closing unused cards before applying may improve your overall financial position.

3. HECS and Student Debt

A common misconception is that HECS debt doesn't matter because there are no interest charges. While it's true that repayments are income based, lenders still take these compulsory repayments into account when calculating your available income.

4. Car Loans and Personal Finance

Financing a new vehicle can significantly reduce your borrowing power because lenders consider the monthly repayment as an existing financial commitment.

Even if your income is strong, a large car loan may reduce the amount you're eligible to borrow for a property. 

5. Lifestyle Expenses

Banks don't assess individual purchases like your weekly coffee or occasional takeaway meal. Instead, they look at your overall living expenses and spending patterns to determine whether a home loan is affordable.

Multiple streaming services, subscription memberships and regular discretionary spending can add up quickly. Reviewing your expenses and identifying areas where you can reduce unnecessary costs may strengthen your application while also helping you save a larger deposit.

Thinking About Buying?

Whether you're hoping to buy your first home next month or in the next few years, having a clear understanding of your borrowing power is the best place to start.

At Westgen Finance, we help first home buyers navigate the process, understand their options and create a plan that suits their goals.

Get in touch with our team for a personalised borrowing power assessment and practical advice on the steps you can take to prepare for home ownership.