How To Increase Your Borrowing Capacity In 2027 (Broker Secrets)
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Why did the bank reduce the Auckland woman's borrowing capacity by $80,000 in six months?
Hello and welcome along to the Property Academy Podcast. I'm your host, Steve McKnight. And I'm Andrew
Nichol.
And this is a show that helps Kiwis grow from zero to five investment properties so you can be financially free and stick around for the next 15 minutes because you're gonna learn how to increase your borrowing capacity in 2026. The Kiwi who got the bank to lend them $580,000 more by doing this, and the one mistake that cost an investor $60,000 of borrowing power. Now there was this Auckland woman, and the bank was willing to lend her about $830,000. But six months later, the same bank would only lend her about $750K. So that's $80,000 effectively gone in six months. Now, here's the thing that's interesting. Her income hadn't actually changed. Her savings hadn't changed. She actually hadn't done a single thing wrong.
But what had changed was That the bank had changed their rules, and it effectively cost her $80,000 in lending. And I think the part that people don't talk about enough is that what the bank lends you can change. Effectively, it's a number produced by a machine, and the machine settings can move, but you can also adapt the numbers that you put into the machine. In other words, adapt your. mortgage application to present it in a light that the bank's going to look favorably on. So before we get into the case studies of ways that you can potentially borrow more, how does the bank actually decide whether they're going to give you a mortgage or not? So
There are three hurdles that you've got to be able to clear to be able to get a mortgage in the first place. So, number one, you've got to meet the LVR or loan to value ratio, the the criteria there. And that's basically how much deposit have you got? What sort of equity or cash are you putting into the purchase? Hurdle number two is your debt-to-income ratios. So these are the new rules where the banks have criteria set by the Reserve Bank where it says you can't borrow any more than six times your Income for an owner-occupier, or if you're an investor, seven times your income. And hurdle number three, and that's the big one probably for today, is uncommitted monthly income. So can you afford to make the new loan repayments, not just in today's interest rate and the way you want to structure it today, but on the bank, uh on the bank test conditions.
What are the three hurdles a borrower must clear to get a mortgage?
That might be a higher interest rate, might be principal and interest. even if it's interest only. And it might be disco uh after discounting your
rent if you're collecting rent as well. And the thing you gotta remember is you can pull different levers to try and get through each gate or jump over each hurdle to get your loan across the line. I'll give you an example of what that can look like. So this is one of the ones that a lot of investors have never considered. So there was an investor who wanted to go ahead and purchase a property. They earned really good income. It was like $120,000, right? Now there's a little bit of a quirk here. It because this person had a student loan, which is ten thousand dollars. And so it's not a particularly large loan, but it can take up a lot of your income because what you've got to remember is that above it's actually a lot of money, eh?
Yeah. Yeah,
and I think this is what people this catches people out because Obviously your servicing, your your ability to afford a mortgage, it depends on what you've got going out and your your student loan um repayments, they can be quite big because unlike a normal loan, like a normal personal loan on say a car, um the repayment size depends on the loan size. But with a student loan, your repayment size depends on your income size.
Size. And so the thing is, if he could clear that $10,000 student loan, and let's say he had the deposit in order to be able to clear that, right? The bank could then say, Oh, all of a sudden you've got $959 extra per month to put towards that mortgage. And if he's buying an investment property, And we put all of his and he and he's buying a property with a yield of say four and a half percent, the average in New Zealand.
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Chapters
6 chapters
1
Why did the bank reduce the Auckland woman's borrowing capacity by $80,000 in six months?
0:00–2:20
2
What are the three hurdles a borrower must clear to get a mortgage?
2:20–6:29
3
How can clearing a $10,000 student loan unlock an extra $225,000 of borrowing power?
6:29–10:32
4
Why does extending a loan term to 30 years increase investment borrowing capacity?
10:32–14:25
5
How does an unused $10,000 credit‑card limit affect borrowing and how can it cost $94,000?
14:25–16:59
6
What factors should you compare when choosing a bank – affordability, pricing, policy and product?
16:59–18:22
Speakers
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