Three easy ways to improve your home loan serviceability

Three easy ways to improve your home loan serviceability

A new report suggests that as many as 32% of millennials plan to take advantage of the COVID-19-weakened housing market but securing a home loan isn’t always a simple process.

Often, this correlates directly with what is known as your home loan serviceability – the factor lenders use as an indicator of how easy or difficult it will be for you to make your loan repayments.

Serviceability is calculated using a formula that takes into account your income, expenses, and various other financial commitments, which is used to ensure that when adding the financial burden of a home loan, you have enough incoming funds to cover everything.

It’s a vitally important component of the borrowing process, and one that you can always stand to improve.

Here, we break down our top three ways to do just that.


Effective budgeting is a solid starting point, as it helps to establish good financial practices as well as a strong serviceability score.

In the period leading up to buying a home, perhaps the last six to 12 months, it is wise to begin planning and reducing your expenses to begin saving more money.

This in turn is beneficial as it builds sustainable habits – ones that have been put into practice and are therefore tried and tested – and your serviceability score will receive a welcome boost.

Reduce your debt

While it is common sense to pay down any debt you may have, be it credit card debt or a personal loan, prior to applying for a home loan, what’s often not considered is reducing your credit card limit and closing any unused accounts.

While you may never go close to exceeding your limit, and may not use a certain card anymore, lenders look at this as potential debt – a factor that can have a detrimental impact on your serviceability.

Avoid payday loans

It’s one of the truest lending red flags – the payday loan. Often quite expensive to pay back, lenders look very negatively upon this method of cash advancement.