What influences borrowing power?

Ever wondered how banks look at an application for a loan? Here’s a short summary of the two main factors lenders take into consideration. First, it’s the upfront deposit and loan setup expenses. Second, it’s the client’s ability to afford the repayments, and this is where your borrowing power comes into play.

Factors that influence borrowing power include:

  • Income - including work, rent from investments and returns on shares
  • Number of applicants and dependants - as this helps determine living expenses
  • Credit card limits - are considered regardless of the amount of debt currently owed
  • Existing loans - including personal, car, business and other property loans
  • Other regular expenses - including HECS
  • Assets that can be offered as security against the loan - such as existing property holdings

If you’re interested in calculating your borrowing power, it pays to work with a mortgage broker. A broker will know how particular lenders will calculate borrowing power and which lender will be more suited for a certain situation.

Any questions on borrowing power, please give us an obligation free call.