What is my borrowing capacity?
One of the most pressing questions for investors is figuring out how much can I borrow? Your borrowing power will also help you narrow down the properties you're interested in.
Your borrowing capacity is influenced by a number of different factors - and not all of them have to do with your savings. Income, expenses and your credit rating all play a role in a lender's decision, although not all lenders have the same criteria necessarily.
Checking out an online calculator before heading to see a lender should give you a rough idea about your financial standing - the process is quick, free and easy.
It should give you a basis to start your preliminary search for property. This will only give you an indicative figure – a mortgage broker can give you an exact figure and will know which lender can maximise your borrowing power.
Your borrowing power will vary between banks and lenders.
Your borrowing power will vary between banks and lenders because they use different methods to assess your capacity and have different lending criteria.
As a guideline, when determining how much you can borrow banks and lenders will look at:
- Credit card limits
- Income and types of income (whether you are a casual, contract or full-time employee)
- The size of the loan compared to the property value
- Number of dependents and their situation
- Type of loan
- General living expenses
- Existing asset position (including the size of your deposit)
Setting up a meeting with a mortgage broker will allow you to get a more specific evaluation. This is also a free assessment and can help you sort through the many different home loan options available to you.