Borrowing Capacity
Your borrowing capacity is something you need to know before you commence your property search as it tells you how much you can spend on your new home and where you can afford to live. Many borrowers go a step further and pre-approve their loan prior to commencing their property search to confirm how much they can borrow.
Your maximum borrowing capacity
Your maximum borrowing capacity will vary from lender to lender because lenders use different methods of assessment and different lending criteria. Your personal circumstances and your income will also play a crucial role on the amount that you will be able to borrow. To have a more precise assessment of your borrowing capacity or to talk to a mortgage broker about the home finance options that are in your best interest, call us on 13 LOAN (+61 2 9249 3739) or email us the form on this page and we will contact you within 2 business hours.
How do lenders assess my borrowing capacity?
A lender will typically review all your income sources and expenditure, add a margin, and then calculate your uncommitted monthly income. This is the most important factor to most lenders. The greater it is, the larger your borrowing capacity will be.
Basic criteria used to determine how much you can borrow may include:
- Loan to Value Ratio
- Income and types of income, e.g. casual, contract, full-time
- Other loans
- Credit card limits
- Loan terms
- Number of dependents and their situation
- Type of Loan
- Tax rates
- Rental income
- General living expenses, and
- Existing asset position, including the size of your deposit.
They may also look at any property currently or previously owned and the type of property you are looking at (eg. house, apartment).
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Your maximum borrowing capacity will vary between lenders.Talk to a mortgage broker for more information that's in your best interest. |
Tips for increasing your borrowing capacity
You may be able to increase your borrowing capacity by employing one or more of the following measures:
- Pay off outstanding term debts (eg. personal loans)
- Pay off and close any credit card, overdraft or line of credit facilities
- Consider reducing the limit of any facility you maintain
- Work out and stick to a budget to improve your deposit and savings history
Increase your borrowing capacity by 20%
If you would like to borrow up to 20 per cent of the property value or alternatively reduce your monthly home loan repayments, then you may want to consider Shared Equity home loans/Equity Finance Mortgages (EFMs). Find out how to increase your borrowing capacity by 20% without increasing your home loan repayments.
calculate your borrowing capacity
Check out our How Much Can I Borrow calculator for a rough assessment of your borrowing capacity. For a more detailed assessment of your situation or to find the loan that is in your best interest, talk to your local mortgage broker and we will return your enquiry within 2 business hours. Or call us at any time on 13 LOAN or direct on +61 2 9249 3739.
