What determines your capacity and how to maximize it?
You might have been asked or introduced to a common term called “Borrowing Capacity” while planning for a Home Loan. It is very important for you to know how much your borrowing capacity is what determines it. Knowing how much you can spend on your property purchase can improve your decision making.
In addition to your deposits, your borrowing capacity also plays an important role in knowing your budget. We have listed a few factors that can influence your borrowing capacity and also how expert advice can help you choose the right lender to maximize your borrowing capacity.
Whenever you make any home loan application, lenders use their own criteria to estimate your borrowing capacity. They also use buffer rate or margin of safety on top of what you are likely to pay in your interest rate. Below are some of the factors that can influence your borrowing capacity.
- Your Income and its type (base, overtime, commission etc)
- Rental income, for an existing or proposed investment property
- Investment income (such as from shares, savings etc
- Non-taxed income (such as government payments, Centrelink payments etc)
- Your family structure (married, de facto, single etc)
- Number of dependent children
- Your household living expenses (such as food and grocery, travel and transport, medical, education and childcare etc)
- Your ongoing commitments (such as a car loan, credit card etc)
Your borrowing capacity could be different from lenders to lenders because they may treat your income differently. By choosing the right lender, for the same level of income, your borrowing capacity can vary up to $60,000 !
If you want to know more
If you are in the borderline or want to borrow a bit more to secure the property you want, please speak with experienced mortgage brokers who can assist you with the loan product and appropriate lender selection.
To book a free consultation session with one of our brokers, please CHOOSE the time that suits you best.