How Much Can I Borrow?

June 06, 2013
Ben Herden

When trying to determine how much you can borrow you will likely search online for a mortgage calculator but beware - they don't look at the whole picture & can leave out very important factors. You don’t want to rest a decision that will affect the rest of your life on the shoulders of an inaccurate online mortgage calculator. Have a Broker be your mortgage calculator. A good mortgage broker has access to over 20 lenders, knows all of their products, knows how each lender behaves, and knows all of their policies. You just can’t get this kind of detail with an online calculator.  

To determine how much of a home loan you qualify for, lenders look at a couple of things:

1. Your Income and Liabilities. (Borrowing Power)

2. Your Deposit. (Purchasing Power)

Borrowing Power

Your borrowing power is figured by subtracting your liabilities from your income. Even though it sounds simple to figure out, every lender has a different method of calculating this which means your borrowing power will be different with just about every lender. See why those online calculators aren’t so accurate? Since all lenders use different calculations, you can get a better idea of what each lender will offer by contacting a mortgage broker. They will be able to give an accurate estimate of what your borrowing power will be with each lender, saving you lots of time, money and effort. 

Your Deposit

Lenders also factor in your deposit. As you know, the deposit is a small percentage of the purchase price that you must pay upfront. While the percentage is small, the amount of money that must be paid is quite large. Unless you have equity in other property to offer, then you'll need to put a deposit to purchase your dream home - regardless of your buying power. The Bank may be prepared to lend you $1million based on your income, but if you don’t have a deposit….. We will dive further in future posts.

In Conclusion

By knowing your borrowing power and your purchasing power you’re not only setting yourself up for success but you are helping to prevent the massive disappointment. You need to know your numbers!

Action to take

1. Contact  Mortgage Choice to get an accurate estimate of your borrowing power.

2. Make a budget. Know your numbers. We can help you with budgeting and cashflow management

3. Don't relay on online mortgage calculators.  Use them as a guide only, but don’t let them replace professional advice.



Posted in: Home loans

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