Hi gangnam,
You could check this calculator and find out yourborrowing power.
Here is a simpler formula to calculate your borrowing power.
Gross income - tax - existing commitments (any loan repayments, rent payments) - new commitments - living expenses - buffer = monthly surplus
This is the standard formula but there are a few variations in how lenders calculate each of these factors. You can learn more about how banks will calculate your income and expense here.
If you have a good income to debt ratio, a good monthly surplus and can show this with good income evidence, you may be able to borrow up to 95% of the property value. However, lenders require you to pay Lenders Mortgage Insurance (LMI), when lending more than 80% of the property value.
For a property of $600,000, the maximum LMI is $7,013 and by choosing the right lender, you can save that amount. You can use our LMI Calculator to estimate the LMI premium you will pay if you are borrowing over 80%.
There is even an option of borrowing 100% of the property value. Your parents can act as a "guarantor" and put their property as a security if you want to borrow without putting any deposit.
Cheers,
Otto
How much will the banks lend for a home?
- Otto Dargan
- Mortgage Specialist
- Posts: 7730
- Joined: Sat Sep 06, 2008 5:55 pm
- Location: Sydney, Australia
- Contact:
- Otto Dargan
- Mortgage Specialist
- Posts: 7730
- Joined: Sat Sep 06, 2008 5:55 pm
- Location: Sydney, Australia
- Contact:
Re: How much will the banks lend for a home?
Hi gangnam,
The calculator uses the same methods used by three of the common lenders that we work with. The values are accurate if you have entered all the required details, although they differ slightly from each other. The values differ because there are a number of calculations that will differ from lender to lender in relation to:
The calculator uses the same methods used by three of the common lenders that we work with. The values are accurate if you have entered all the required details, although they differ slightly from each other. The values differ because there are a number of calculations that will differ from lender to lender in relation to:
- Living expenses
Each lender calculates your living expenses differently. Usually, lenders compare your estimated expense and their standard estimate of your living expense and use the higher one of these two. - Debt repayments
While most lenders use the rent and personal loan payments in their assessment, they may or may not use credit card payments as a part of the assessment. - Mortgage repayments
Lenders usually calculate your existing mortgage repayments at a higher interest rate to determine whether you can still repay the loan in case of rise in interest rate. - Buffer
Most of the lenders require you to have extra funds to reduce the risk of you not being able to afford the repayments.