Borrowing Power Calculator

When you apply for a loan, the borrowing power or borrowing capacity refers to the maximum amount of money that the lender is willing to lend you.

Use the Borrowing Power calculator above to quickly estimate your borrowing capacity. For a more precise borrowing power estimate based on your preferred lender, get in touch with our Broker.

When you apply for a loan, lenders assess your borrowing capacity based on several factors, including your income, expenses, credit score, and debt-to-income ratio. They use this information to determine how much money they are willing to lend you and at what interest rate. It’s important to have a good understanding of your financial situation before applying for a loan, as this can impact your ability to secure the funding you need.

When it comes to borrowing power, there is no single number that fits everyone. It is generally recommended that you keep your home loan repayments below 30% of your gross income.

You can use the Repayment Calculator  to estimate your repayments and figure out what works best for your situation.  

To increase your borrowing power, there are various options available. These include:

  • Paying off your debts
  • Enhancing your credit score
  • Declaring all your income
  • Reducing your expenses
  • Lowering your credit card limits
  • Saving more for your home loan deposit
  • Extending your home loan repayment term
  • Strengthening your savings habits
  • Find a guarantor

With a guarantor, borrowers can secure a loan for up to 95% of the property’s value without having to pay Lenders Mortgage Insurance, but the maximum LVR varies among lenders. Guarantors do not typically make financial contributions to mortgage repayments, so borrowers must show they can meet repayments themselves.

Before seeking a guarantor for a home loan, it’s important to research and compare different lenders to find the best option for your financial situation. Additionally, it’s crucial to have a solid plan for making mortgage repayments on your own, as relying solely on a guarantor can lead to financial strain in the long run.

There are several ways you could increase your borrowing power. Some of these include: 

  • Pay off your debts 
  • Improve your credit score 
  • Claim all your income 
  • Cut down on your expenses 
  • Reduce your credit card limits 
  • Save more for your home loan deposit 
  • Extend your home loan repayment term 
  • Strengthen your savings habits 

Lenders consider several factors when determining your borrowing power, including:

  • Your income and assets
  • Credit and savings history
  • Debts
  • Monthly spending
  • The type of loan you want
  • The loan term and interest rate
  • The size of your home loan deposit
  • The market value of your desired property
  • Personal characteristics such as age,job and number of applicants.

The HECS-HELP debt will impact your ability to borrow money, similar to any other debt. The extent of the impact will be determined by the outstanding balance and the minimum repayment rate, which is based on your income.

Home equity is the difference between a property’s current market value and any debt held against it. Basically, it is the proportion of the home that you own outright.  

It’s important to remember, though, that you might not be able to use the entire amount of your available equity, depending on how property prices are performing. Lenders will generally allow you to borrow 80% of your home’s current value minus your outstanding debt. 

Yes, if you have equity in an existing property, you could substantially boost your borrowing power. Lenders will likely lend you no more than 80% of your home’s current value.  

To calculate your home’s usable equity, take 80% of the value of your property minus your outstanding loan balance. For example, let’s say your property’s value is $1,000,000 and you have an outstanding loan balance of $200,000. 

  • Your home’s value = $1,000,000 x 0.80% = $800,000 
  • Your home’s potential useable equity = $800,000 – $400,000 = $400,000 

So, if your home is worth $1,000,000 and you still owe $200,000 on your mortgage, you have $400,000 of useable equity towards the purchase of an investment property. But you’ll still need to show the lender you can afford the repayments on the full loan amount, which will include both the previous mortgage and the new one. 

Use our Mortgage Repayments Calculator to get a better idea of your estimated repayments.  

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