How much can I borrow?

September 10, 2014
Rikki Stanley

The first question when thinking about buying a home is often, “How much can I borrow?” Then you generally decide how much deposit you will need and the price you want to spend on a home.

To make it easier to work this out, a Mortgage Choice home loan expert can help you determine how much you can borrow, and more importantly, how much you can afford to repay.

 

 

 

Working out your borrowing power – online calculators

 

So you have your deposit at the ready, or a guarantor willing to support you with it, or perhaps you want to just get the planning started towards buying your first home. The next question is usually, “how do you know how much a bank or lender will give you?”

 

You can spend hours trying to do the math yourself using a variety of online calculators, (all the lenders and brokers have them) only to be left scratching your head at why they all seem to want to give you different amounts, when you put in the same figures. Who has time for that?

 

Get it right - Let your broker to do the maths for you

 

Online calculators can give you a great estimate of what you can borrow, but to make sure you don’t get it wrong, it’s best to ask your mortgage broker to use their software to work out  exactly how much a variety of lenders are willing to give you. Once you have that information, you can then determine what your maximum spend will be when looking at properties to buy, and based on that, determine which lender to use when you do find your dream home.

 

Use your daily budget to make sure you can afford to live in your new home

 

Check out Mortgage Choice's free budget planner download here 

 

Taking into account your everyday budget and cash flow is essential when looking at getting a mortgage. Often online calculators don’t take into account all your everyday spending, resulting in you doing high fives in the air at how much they are willing to give you, when in reality, perhaps it isn’t wise to borrow so much.

 

Don’t forget to take into account every day expenses on top of credit card debts and other loan repayments. There is no point having a loan and a house if you can’t afford to live, or feed your family when you move into it.

 

Narrow down your property search

 

Knowing your borrowing power helps you narrow down your property search. If you know lenders will only give you $400K, then you know you can’t be looking in the $600K price range for houses to buy, unless you have a very generous deposit, or a very generous guarantor perhaps.  

 

 

Know what you need to get a loan

Your broker also knows all the criteria involved with getting a loan for each lender. Your borrowing power is typically based on:

  • Your income
  • Your debts
  • Your financial commitments
  • Your assets
  • Your credit history,
  • The loan type you are interested in
  • Your savings and deposit amount
  • Your employment history
  • Your stability of residence

 

Each lender places different values on each of these criteria when it comes to determining how much they will lend to you. Some lenders will opt to lend you more or less, based on certain very hard to explain internal calculations. The calculators you use online give you a general estimate of how much you can borrow, but it is always best to let your mortgage choice broker take you through all the available options and borrowing eligibility assessments. This way, you will have a very clear idea of what you can really afford. There’s no point going with a lender who will lend you more, if in reality, you can’t really afford to make those repayments.

 

Get a clear picture of what your end result will be

 

Knowing exactly how much you can borrow, in addition to how much deposit you will need to buy your property, gives you a clearer picture what your financial commitments will be when you do take on the mortgage associated with buying your first home.

 

Consider applying for a pre-approval

 

When you know how much you can borrow, and therefore how much you can spend, get yourself even more confident to buy with a pre-approval for finance. Pre-approvals give you a purchase limit, and bargaining power. Agents and sellers can see that you are ready to buy if you have already taken steps to get your finance in place. They also might make you super confident to bid at auctions.

 

Do your calculations

 

Mortgage Choice offers a simple borrowing capacity calculator to help you determine a rough estimate of your borrowing power. Click here to use our calculator.

  

Want us to do the maths for you?

 

 Book your free consultation with Daniel Meade to determine your borrowing capacity here.

 

For further information on this or any other topic, please contact your mobile mortgage choice broker, Daniel Meade on:

 

Phone 07 3833 9666,

Email daniel.meade@mortgagechoice.com.au 

Or simply click on the contact us tab on this page.

 

If this information has been helpful to you or might be relevant to someone you know, please share it.

 

Daniel is looking forward to helping you determine your borrowing power today.  Thanks for reading our blog.

 

Important information

This article is for general information purposes only. It has been prepared without considering your objectives, financial situation or needs. You should, before acting on the advice, consider its appropriateness to your circumstances.

Posted in: First home buyers

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