Spending Habits That Kill Your Borrowing Capacity And How to Fix Them

When it comes to applying for a home loan, your borrowing capacity is more than just your income. Lenders look closely at how you spend your money, not just how much you earn. Even small, regular expenses can make a surprising difference to how much you can borrow. Whether you’re a first-home buyer or looking to invest, understanding your spending habits is one of the easiest ways to improve your borrowing potential, without changing your income.

What Does Borrowing Capacity Really Mean?

Your borrowing capacity is the amount a lender is willing to let you borrow based on your income, expenses, existing debts, and overall financial profile.

Every lender uses its own formula, known as a serviceability assessment, to calculate how much you can afford to repay. While the details differ between lenders, the same key principle applies: the more of your income that goes to discretionary or ongoing expenses, the less room there is for future loan repayments.

Overusing Afterpay, Zip Pay, and Buy Now Pay Later

Buy Now Pay Later (BNPL) platforms have become part of everyday life for many Aussies, but lenders view them as short-term credit. Even if you pay on time, they show up on your credit file and can affect how your spending is assessed.

How to fix it:
Try closing unused BNPL accounts and paying off any active balances before applying for a home loan. Showing consistent control over your spending can help demonstrate responsible money management.

Credit Card Limits (Not Just Balances)

Even if you never use your full credit limit, lenders assume you could, and they factor that potential debt into your borrowing assessment. A $10,000 limit can reduce your borrowing power by tens of thousands of dollars.

How to fix it:
Consider lowering unused credit card limits or cancelling cards you no longer need. Keep one modest limit for emergencies if necessary, but avoid stacking multiple accounts.

Subscriptions and Streaming Services

Netflix, Spotify, Amazon Prime, meal kits, cloud storage, they all add up. Lenders look at regular outgoings to see how much of your income is tied up in ongoing expenses.

How to fix it:
Do a quick audit of your subscriptions. Cancel anything you’re not using regularly, and track your monthly commitments. Even saving $100–$200 a month can improve your overall cash flow profile.

Frequent Takeaway and Dining Out

Uber Eats and weekend brunches are convenient but costly. Lenders examine bank statements to see how you manage discretionary spending. Regular takeout and high entertainment costs can signal reduced savings discipline.

How to fix it:
Plan more meals at home and set a simple budget for dining out. You don’t have to eliminate it entirely, but showing you can control lifestyle spending matters.

Personal Loans and Car Finance

Large personal or car loans impact your debt-to-income ratio, directly reducing borrowing capacity. Even if repayments are manageable, lenders must include them in your monthly expense calculations.

How to fix it:
If possible, clear smaller loans before applying for a mortgage, or consolidate multiple debts into one structured repayment (with professional advice). Avoid taking on new finance in the months leading up to your application.

Gambling or High-Risk Transactions

Even small, regular gambling transactions can raise concerns with lenders. They’re seen as high-risk behaviours that suggest financial instability, regardless of the amounts involved.

How to fix it:
If you occasionally gamble, avoid doing so in the months before your application. Maintaining clean, consistent bank statements for at least three months can make a difference.

Inconsistent Savings Habits

Lenders like to see consistent savings patterns, not just one-off deposits. Regular transfers to savings accounts, even in small amounts, demonstrate financial discipline.

How to fix it:
Set up automatic transfers to a savings account right after payday. Label it clearly (for example, House Deposit Account) to show intentional saving behaviour.

Why This Matters

When lenders assess your home loan application, they’re not just looking for “perfect” finances they’re assessing risk and repayment ability. Strong spending habits show you can manage debt responsibly, which may make lenders more comfortable approving your application.

Improving your borrowing capacity isn’t just about earning more, it’s about spending smarter. Small, consistent changes to your financial habits can make a meaningful difference when it’s time to apply for a home loan. Remember: every person’s situation is unique. Always seek independent financial advice before making major financial or credit decisions.  Make informed choices and secure your dream home with BrokerCo today!