Understanding Borrowing Power
Your borrowing power, or borrowing capacity, is the maximum amount a lender might offer you for a home loan. While each lender has specific criteria, here’s a breakdown of the key factors they consider:
Factors Influencing Your Borrowing Power
Income: Lenders analyze your total income, including salary, wages, rental income, eligible government benefits, and consistent business income.
Living Expenses: Your regular, essential expenses are thoroughly examined. These include costs like groceries, utilities, transportation, childcare, and other necessities.
Existing Debts: Outstanding credit card balances, personal loans, car loans, and other forms of debt impact your borrowing capacity. Lenders assess your debt-to-income ratio to ensure affordability.
Proposed Loan Amount: The loan size you seek directly influences your required repayments. Lenders analyze this to ensure you can realistically manage the repayments.
The Role of Assessment Rates
Lenders apply an ‘assessment rate’ to your calculations, which is higher than the current interest rate. This serves as a buffer against potential future interest rate increases, ensuring you can still afford your mortgage should rates rise.
You First Finance: Your Lending Experts
Understanding how lenders calculate borrowing power is complex. At You First Finance, we help you navigate these assessments and explore your options with various lenders. Our goal is to empower you with knowledge to make confident decisions in your homeownership journey.
Contact us today to discuss your individual circumstances and unlock your borrowing potential.
