Our borrowing power calculator provides an initial estimate of how much you can borrow based on your current circumstances.
It is a helpful step to do before you contact your mortgage broker. You can see the effect of different loan periods and interest rates on the following:
- amount of money you can borrow;
- total interest to be paid; and
- estimated monthly loan repayments.
By entering the length of the mortgage, your salary (plus additional income if you intend to co-purchase), your expenses, and the number of dependents you may have, this calculator will measure your borrowing power based on your earnings and other financial commitments.
Check that you enter realistic numbers to get a more exact picture of what you can modestly and comfortably afford to borrow. You’ll not want to end up financially overstressed or working extra hard to keep up with your repayments.
Definition of Terms:
- Joint Income – This refers to all the combined income streams and tax liabilities of legally married couples.
- Dependents – Individuals who are dependent on others for financial support, usually these are family members or relatives.
- Net salary – This is your take-home pay after all deductions like statutory fees, interest, depreciation, and other taxes have been made.
- Other net income – Total of earnings or profit after making deductions, but excluding the salary and all similar forms of income
- Maximum percent of income available – This is an estimated amount of income available to investors to use for the loan.
- Annual expenses – The sum of all expenses made vs. a person’s financial state which includes but not limited to the following: car loans, rent, mortgage, clothing, and medical expenses.
- Monthly car loan repayment – The monthly amount paid to lenders to satisfy any car loan debt.
- Average monthly credit card repayment – The monthly amount being paid to lenders to satisfy any credit card loan debt.
- Other payments – Any and every other expense and payment not listed in the calculations, but also not listed in your yearly expense calculations.
- Interest rate – The interest amount payable per period as a percentage of the amount borrowed, loaned, or deposited.
- Loan term – As detailed in the loan agreement, the period needed to repay the loan (i.e., the total number of years).
- Interest rate buffer – The additional percentage on top of your interest rate to manage any loan repayment variations.
- Approximate amount of loan – The estimated amount of total loan offered to benefit the investors.
- Approximate monthly repayments – Amount that comes close to how much repayments are to be used by investors monthly to comply with the loan.
DISCLAIMER: What this calculator will show you are information for approximate estimated values, depending on inputs keyed in and detailed assumptions.
Definition of Borrowing Power
It’s what lenders used to define how much you can borrow based on your financial condition. The factors affecting your borrowing power are the following: how much you earn, how much you’ve saved as a deposit, and how much you owe or repay for other debts like credit cards, and whether you have a guarantor.
How can you Increase your Borrowing Power?
It is based primarily on two things: the amount of your income and what you spend your money on or your expenses. We take into account items like utility bills, school fees, rent, and debt repayments. We also include your grocery and entertainment expenses to guarantee that you’d be able to repay the loan amount over time with your financial situation and lifestyle.
These are some tips to help increase your borrowing power:
- Lessen your credit limit – terminate credit card services if not being used;
- Repay debts and/or personal loans;
- Decrease your spending;
- Maintain a good credit score;
- Divide your obligations with someone like a partner if borrowing on your own;
- Start or keep saving to demonstrate a good savings history.
What Affects your Borrowing Power other than Income and Expenses?
Other factors can affect your borrowing power aside from income and expenses. For instance, check your debt limits such as personal loans and credit cards. Even though you’ve fully paid your credit card, your home lender might still consider these limits as probable debt, affecting the amount of money they’ll be willing to lend you.
One that can also affect your borrowing power is your debt repayment history. It might be a good idea to get a copy of your credit report for your credit history before starting your application. Once you checked that it’s not as strong as it should be, it’s best to pay down personal loans and credit cards, or perhaps, close loan and credit accounts that you’re not using.
Your employment status is also one factor. It might be more complicated to show your earnings if you are self-employed or an entrepreneur.
How do Dependents Affect your Borrowing Power?
It is our responsibility as parents to raise and support our children and this undeniably involves some costs. As with home loans – this parenting obligation lasts for many years, and so do the costs that come with it. This is the reason why the number of dependents you support affects your borrowing power. The fact is your family is an unending important part of your life that costs money, so it has an effect to what you can afford to pay in the long run.
Will my ability to borrow be different if I am buying a home to live in or an investment property?
The amount you could borrow might go up or down depending on a number of factors related to the property you want to buy. For instance:
- Potential rental income from an investment property you want to buy
- Expenses associated with owning and maintaining an investment property vs. a property to live in
- Loans for an investment purpose generally come with a higher interest rate than loans for a property to live in, which can potentially affect your regular repayment amount. In turn, this could have an impact on how much you could borrow.
If I already own an investment property, will that improve my borrowing power?
Your borrowing power might go up or down depending on things like:
- The rental income you receive from the investment property
- The expenses involved in maintaining it
- If you still owe money on your existing home loan(s).
Will the amount I can borrow be different if I’m single or with a spouse/partner?
This can largely depend on your individual or combined income and expenses. Also keep in mind that lenders will usually take the debts of everyone on a home loan application into account when they work out how much they could lend you.
Besides the deposit, what costs do I need to budget for when buying a house?
Here’s a rundown of the costs usually involved when you buy a home:
- Stamp duty
- Title transfer fee
- Title search fee
- Mortgage registration fee
- Solicitor or Conveyancing fees
- Lenders’ Mortgage Insurance (LMI) – if you are borrowing more than 80% of your home value
- Building insurance, as well as contents and portable contents insurance
- Loan application fee, and other bank fees and charges
- Property valuation fees
- Moving costs
- Ongoing costs like home loan repayments, strata fees, council rates, utilities and property maintenance