A range of factors affect your borrowing capacity. These include:-
- Your income – from salary or other sources.
- Existing debts and liabilities, including existing mortgages and other personal loans.
- Credit cards – not just any outstanding balance but also the credit limit on your cards.
- Your cost of living, excluding mortgage payments. This will include food, transport, entertainment, utilities and insurance.
- Your dependents – either children or non-working partner. The costs incurred by these dependents should be included in your cost of living.
- The value of the security you are offering the bank. The bank will arrange a valuation of your property. Depending on the type of loan you are seeking, a bank may lend up to 95% of the value of the property.
- The size of deposit you have saved.
Your mortgage broker will analyse these inputs and ascertain how much each of his lenders will be prepared to lend you. There is a surprisingly large variation between lenders. For example, a single person on a salary of $70,000, average living expenses, an $80,000 deposit and no other debts or credit cards could borrow between $353,000 and $482,000, depending on which lender was selected.
Many bank websites have a calculator for borrowing capacity. However, with such a large variation between lenders, it may be unwise to simply use the figure from a single bank. This is where a mortgage broker, such as Mortgage Choice Boroondara, can be extremely useful, allowing an immediate comparison of dozens of lenders.