How Much Can You Borrow
When buying a home, the first question buyers usually ask is “How much can I borrow?” Reality is most of the lenders are often inclined to loan you more money than you expect especially when you have a good credit score. Thus, you can except as much as you want to buy a home, lenders want to loan you money if you meet all the eligibility criteria.
Here are some of the factors that affect the borrowing power:
Potential lenders usually check your income details to evaluate your borrowing capacity. Your income is an important factor that indicates how much you can repay each month. You may have to demonstrate the lender your ongoing financial commitments and how much of your income have you been able to save. Even more, proof of your ability to save is also important to show your lender.
Loan Type and Loan Term
The loan interest rate and loan term make a difference in the amount you can borrow. Your loan repayments will be lower if the interest rate is lower. Long-term loan means lower repayment each month whereas short-term loan increases your repayments but could save you thousands of dollars in interest.
Debts and Expenditures
A potential lender will definitely check your debts and expenditures to determine if your income is still sufficient to make your repayments. The expenses that lenders usually consider are credit cards, bills, car loans, mortgages, and loans of all types. Paying off the loan on time is an important factor to determine the loan approval. Your payment history and bankruptcy is also taken into consideration.
Size of Deposit
Many lenders also verify the borrower’s ability to make repayments by determining how large the deposit is. The larger deposit shows that you have the ability to save regardless of your expenses.
It is important for you to know how much you can afford. You can’t opt for a bigger loan as you will be amazed to see the estimate of the interest you’ll pay over the life of the loan. Before you apply for home loans in Australia, determine the annual income, expected loan term and interest rate, your monthly debt payments, and home-related expenses.
There are many calculators available online to determine the maximum home loan amount you’re likely to qualify for by examining your income and debt. The calculator considers elements of home loan, such as principal and interest. It is easy to calculate all home-related financial figures on your fingertips using a home loan calculator and you can get an estimate of how much you can borrow and how much you can afford to spend. However, the results from this calculator are only indications. The results by calculator do not represent either quotes or pre-qualifications for a loan. The exact details of your loan will be provided to you in your loan contract. It is advised that you should consult a qualified broker to determine the best loan option for you and detailed information related to a home loan.