Did you know how much you can borrow?
Knowing your borrowing power is essential for setting realistic goals and narrowing down your property search.
In this blog, we’ll break down the factors lenders consider and provide tips to maximise your borrowing capacity.
What Is Borrowing Power?
Borrowing power refers to the amount of money a lender is willing to let you borrow to purchase a home or investment. It’s determined by various factors, including your income, expenses, credit score, and the deposit you can contribute.
Key Factors That Impact Borrowing Capacity
Income: Your income is one of the biggest factors. Lenders will assess all sources of income, including your salary, rental income, dividends, or other regular earnings. The higher your income, the more you’re likely to borrow.
Expert tips: If you are a healthcare professional, factors like overtime, loadings, and salary packaging are calculated differently by each bank. These variations can have a significant impact on how much you can borrow.
Expenses: Lenders will look at your regular expenses, including rent, groceries, utilities, subscriptions, and discretionary spending. Keeping your expenses under control can improve your borrowing power.
Credit Score: A good credit score signals to lenders that you’re a reliable borrower. Pay your bills on time, reduce your debts, and avoid applying for unnecessary credit to improve your score.
Debt-to-Income Ratio (DTI): This is the ratio of your total debt repayments to your income. Lenders prefer borrowers with a lower DTI, as it shows you’re not over-leveraged.
Deposit: The size of your deposit directly impacts your borrowing power. A larger deposit reduces your Loan-to-Value Ratio (LVR), which can lead to better interest rates and avoid Lenders Mortgage Insurance (LMI).
Special Benefit for Healthcare Professionals: Many lenders offer flexibility with smaller deposit requirements for healthcare workers, making it easier to enter the property market.
Interest Rates: Fluctuations in interest rates can affect how much you can borrow. Higher rates mean higher repayments, which may reduce your borrowing power.
Special Benefit for Healthcare Professionals: Some lenders provide healthcare workers with priority approvals or better rates, reflecting the stability and reliability of their income.
How to Calculate Your Borrowing Power
Use a Borrowing Power Calculator: Get an instant estimate of how much you can borrow with our Borrowing Power Calculator. Simply input your income, expenses, and loans to find out your borrowing potential.
Review Your Financial Situation: Look at your income, debts, and savings to understand your position.
Speak with a Mortgage Broker: A broker can provide a more accurate assessment and show you loan options tailored to your situation. Book a free consultation with us. Our team of expert mortgage brokers is here to guide you every step of the way.
Expert Tips to Maximise Your Borrowing Power
Reduce your expenses and pay off existing debts.
Improve your credit score by paying bills on time and limiting credit applications.
Save a larger deposit to lower your LVR.
Avoid large purchases or new debts before applying for a loan.
Understanding these key terms is the first step to making informed decisions about your home loan.
Ready to Unlock Your Borrowing Power?
We’re here to make it simple.
From calculating your income to understanding deposits, our expert team will guide you through the process and help you maximise your borrowing power.
Follow us on Instagram for more tips and updates—get started on your journey today!
Comments