February 19, 2015
When you’re on the hunt for a home, one of the first things you do is figure out how much money you can borrow. Here are seven factors that can affect your borrowing capacity and help you work out what you can afford.
- Income. The first factor that will affect your borrowing capacity is your income. Before a lender will give you a home loan, they will want to assess how much you can afford in mortgage repayments. They will look at your income as well as any outstanding debts and other commitments you have.
- Expenses. The second factor is your lifestyle expenses. When trying to establish how much you can comfortably borrow, you'll need to take a close look at your living expenses and work out what you can realistically afford in mortgage repayments while still retaining a good standard of living.
- Credit History. The third factor at play is your credit history. If you can prove you are a reliable customer who meets their financial obligations on time, you may be able to borrow a higher amount. Of course, if you have missed a few bills or credit card payments in the past, this may work against you when you are trying to obtain finance. Before seeing a lender, it is a good idea to get a copy of your credit history and see if there are any red flags or problems you can address before you start looking for finance.
- Deposit. The fourth factor is your property deposit: The bigger your property deposit is, the easier it will be to obtain finance and potentially borrow a higher amount. Lenders like to see that you are able to save money over a period of time.
- Terms The fifth factor you have to be aware of is your home loan type, term and interest rate: The amount of money you can borrow may depend on the interest rate and the term of your home loan. The lower the interest rate, the lower your repayments will be. A longer-term home loan will mean lower repayments, but a shorter-term loan may save you interest. You need to think carefully about what is most important to you.
- Assets What you have in the way of assets can also play a significant role in determining how much you can borrow. Having assets like a vehicle, an investment property or shares can significantly influence a lender’s decision.
- Value Finally, once you have found the property you would like to purchase, how much a lender will lend to you will depend on what the property is worth. The lender will find out how much a property is worth by conducting a valuation of the property. That valuation will then determine exactly how much they can and will lend to you.
Your local Blue Mountains and Penrith mortgage broker can help you work out how much you can afford to borrow and step you through the whole home loan process. So why not give Mortgage Choice Blaxland and Penrith a call today on (02) 4739 9749.