How to Increase Your Borrowing Capacity for an Investment Loan: What Every Investor Should Know

Whether you’re buying your first investment property or expanding your portfolio, your borrowing capacity plays a major role in how far you can go. Borrowing capacity is the amount a lender may be willing to approve based on factors such as income, existing debts, living expenses, and the investment’s expected performance. While no strategy guarantees a higher borrowing limit, there are several practical steps investors often consider when preparing their finances, all of which should be reviewed carefully with professional advice.

How-to-Increase-Your-Borrowing-Capacity-for-an-Investment-Loan-What-Every-Investor-Should-Know

Strengthen Your Personal Financial Position

Lenders assess your financial behaviour to determine how comfortably you can meet repayments. Improving your financial foundations may support a stronger application.

You can start by:

  • Reviewing and reducing discretionary spending
  • Paying bills and existing debts on time
  • Building up savings to demonstrate strong financial discipline
  • Avoiding unnecessary credit applications

These small adjustments can help create a more stable and consistent financial picture.

Reduce High-Interest or Unsecured Debt

Credit card balances, personal loans, and car loans can significantly reduce borrowing capacity because lenders factor in the repayments, even if the debt itself seems small.

Some investors choose to:

  • Pay down high-interest debt
  • Lower credit card limits
  • Close unused accounts

However, the right approach depends on your personal situation, and independent advice is recommended before making any changes to financial structures.

Improve Your Credit Score

Your credit score affects how lenders view your reliability. A strong credit history may support a more favourable lending assessment.

Ways to maintain or improve your credit rating include:

  • Paying bills on time
  • Minimising credit enquiries
  • Reviewing your credit file for errors
  • Keeping credit utilisation low

You can obtain a free credit report from agencies such as Equifax, Experian or illion.

Maximise Your Rental Income Documentation

For investment loans, lenders may consider rental income from the property you intend to purchase or from properties you already own. However, they generally apply a rental shading factor, meaning they only count a portion of the expected rental amount when assessing serviceability. Ensuring your rental income is well-documented, supported by agent estimates or existing lease agreements, can help lenders assess the investment fairly.

Review Your Loan Structure With a Broker

Loan product selection, repayment type, and lender policies can influence your borrowing capacity. A mortgage and finance broker can outline how different lenders assess investment loans, including:

  • How they treat rental income
  • How they calculate living expenses
  • Their approach to existing mortgage commitments
  • Their criteria for interest-only vs principal-and-interest repayments

Consider Increasing Your Income (Where Possible)

Some investors look for ways to strengthen their income position, such as:

  • Increasing hours or taking additional work
  • Adjusting business income documentation (for self-employed borrowers)
  • Ensuring all legitimate income streams are included in the assessment

These steps vary widely depending on personal circumstances and should be considered with the support of a financial adviser or accountant.

Maintain a Strong Savings Buffer

Lenders often look favourably on applicants who maintain healthy cash buffers. This shows financial discipline and provides reassurance that you can manage unexpected expenses or short-term income changes. Your buffer should align with your risk tolerance and financial goals, and a qualified adviser can help you determine an appropriate level.

Increasing your borrowing capacity for an investment loan isn’t about shortcuts, it’s about strengthening your financial wellbeing, understanding lender expectations, and planning ahead. By improving your financial habits, managing debt responsibly, and working with experienced professionals, you can put yourself in a stronger position when applying for investment finance.

If you’re exploring your investment loan options, BrokerCo can provide general guidance on how lenders typically assess borrowers, what documents you may need, and how to prepare for discussions with lenders.

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