How much can I borrow for my home loan?

Buying your first home is an exciting time. Before you start looking, you need to know how much you can borrow so you know which properties are in your price range. How much you can borrow will be determined by a few things.

1. Your income

Your income helps lenders work out how much you can afford to repay. A bank or lender needs to be sure you will be able to service the loan on your income before they lend to you. This income is not strictly limited to your wage though, it can include Centrelink payments, joint incomes, real estate income and other sources. Be sure to include all your sources of income when working out how much you can borrow.

2. Commitments and expenses

Any debt, current payments you need to make and living expenses are included when working out your borrowing power. If you have personal loans, a credit card or other commitments, it will reduce your borrowing power as the amount of money you have available each week is smaller. Your regular living expenses includ bills, rent, food and other expenses that are incurred with your lifestyle.

3. Credit history

A good credit history provides you with more options for lenders and a better interest rate. A bad credit history makes getting finance harder. Check your credit history to ensure there are no marks on it. If you do have issues with your credit history, look at how you can remove them or improve it to improve your chances of securing a home loan.

4. Savings and deposit

A good savings history and deposit make it easier to get a home loan. A deposit reduces the amount you need to borrow and if you have 20% or more, you won’t need to pay LMI (Lenders Mortgage Insurance). 

5. Your assets

Your assets include things you own such as your car. If the car is worth more than what you owe on the car loan or you paid cash for it, these both look good on your application.

6. Value of the property

The value of the property needs to be higher than your loan for a bank or lender to approve the mortgage. If a property is valued well above what you need to borrow for it, the home loan process will be easier.

How much you can borrow for a home loan varies so much from person to person. You can use our calculator or talk to a broker today to find out how much you can borrow for your home.



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