How's Your Borrowing Capacity? - A Quick Guide
The criteria surrounding home loans and an individual’s borrowing capacity have become far stricter in recent years. The ship of easy credit has sailed and a number of factors are examined when someone applies for a loan.
Banks and lenders are likely to look at the amount of money you’re looking to borrow versus both your annual income and the type of income it is (casual, full-time, part-time).
There is a degree of risk which comes with lending money, so the lenders want to be assured there is a reasonable degree of faith that they will be repaid successfully plus interest.
Another factor involved in loan calculation is an individual’s credit history. Banks and lenders will be more likely to loan to those who have already proven their reliability and trustworthiness.
Moving away from economic factors, another aspect of an individual examined by lenders for an individual’s borrowing capacity is their age and number of dependants. The younger you are, the longer you are theoretically able to work and the longer the terms of your loan can be.
Once people begin to reach 50, banks have to factor in the amount of time until an individual’s retirement and how much longer they will continue working, earning and repaying. The window of income decreases from 30-40 years down to 10-15, thus affecting the terms of any potential loans.
Of course, home loans are judged on a case-by-case basis, so get in contact with a mortgage broker for professional advice.
To get more detailed information on your situation, talk to a Loan Market mortgage broker today.