‘How Much Can I Borrow’ Calculator
Disclaimer: The ‘How much can I borrow?’ calculator takes your income and expenditure and provides an accurate indication of how much you can afford to borrow.It combines the exact method used by the serviceability calculators of three banks to find out whether you’d be eligible for a home loan.
What Is Borrowing Power?
Borrowing power is essentially your financial capacity to get approved for a home loan. It signifies the maximum amount of money a lender is willing to lend you.
Before you get approved for a home loan, lenders will thoroughly assess your financial situation to ensure you can comfortably manage repayments. This assessment considers various factors, such as your income, expenses, existing debts, credit history and assets.
The lender’s assessment will determine your borrowing power, giving you a clear idea of the price range within which you can search for properties.
How Our ‘How Much Can I Borrow’ Calculator Works
Our borrowing power calculator takes a very different approach to helping you find the most suitable loan:- It compares three banks in one go.
- It uses the actual calculation methods the lenders’ credit departments use.
- It can change the loan structure to work out your maximum borrowing power.
- It takes into account advanced features such as fixed rates, negative gearing, interest-only periods and your family size.
- Income: A higher and more consistent income could enable you to borrow more.
- Debts and financial commitments: Large existing debts can decrease borrowing power.
- Living expenses: High expenses may signal instability to lenders, lowering your borrowing power.
- Credit history: A good credit history indicates reliability and may increase borrowing power.
- Assets: Tangible and intangible assets add to credibility and borrowing capacity.
- Deposit size: Larger deposits reduce lender risk, meaning you may be able to borrow more.
- Home loan type, term and interest rate: Lower fees and interest rates increase borrowing power.
- Value of the property: Property valuation influences the maximum loan amount.
- When you apply for a home loan, a hard enquiry goes onto your credit file.
- Adding a mortgage application increases your potential debt obligation, raising your debt-to-income (DTI) ratio.
- Applying for multiple pre-approvals within a short period can lower your credit score and make lenders cautious about lending to you.
- You can take out a home equity loan or a home equity line of credit to use for home improvements, debt consolidation, or other financial needs.
- You can use the equity as a deposit to purchase another property, as it can lower the amount you borrow from the lender.
In fact, the borrowing power calculator is so accurate that it even copies small errors in the tax rates used by some of the banks. If you’d like to get the best mortgage deal then please fill in our free online assessment form or call us on 1300 889 743 and one of our mortgage brokers will provide you with an obligation-free quote.
We have extensive knowledge of lender serviceability criteria, so we can provide you with an accurate assessment of how much you can afford to borrow.
Factors That Affect Borrowing Power
Understanding the factors that shape your ability to get approved for a home loan is key. Various factors come into play, from your income to existing debts to your credit history and assets.
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Borrowing Power FAQs
Yes, improving your credit score could increase your borrowing power. A good credit score indicates to the lender that you’ve taken steps to improve your credit standing, and you might get approved for a larger loan, as you have shown you can make repayments on time.
If your borrowing power is lower than expected, you can take steps to improve your financial health and even explore alternative lending options.
This is where the expertise of a mortgage broker can help.
At Home Loan Experts, we can negotiate with lenders to secure competitive rates and terms, maximising your borrowing power and saving you money over the life of the loan. Call us on 1300 889 743 or complete our free online enquiry form today.
Your borrowing power will depend on your income, family size, location, current debts, type of loan and the lender that you choose. The easiest way to increase your borrowing power is to choose a lender that can lend more to someone in your situation. Some banks are conservative when lending to investors, some use higher estimates for living expenses in their assessments, and others will lend you less if you have an interest-only loan. However, you can also change your situation to improve your borrowing capacity.
Changes in interest rates have a notable impact on borrowing power, extending beyond mere fluctuations in monthly payments and overall loan expenses.
If there is an interest rate increase, it could reduce your borrowing power. This effect is amplified by serviceability buffers, which are additional percentage points lenders add to the interest rate during loan assessment.
For instance, in October 2021, the Australian Prudential Regulation Authority increased the minimum serviceability buffer from 2.5 points to 3. This means that if you apply for a loan with a 4.5% interest rate, the lender assesses your repayment capacity as if the rate were 7.5%.
Yes, applying for a mortgage affects your borrowing power:
