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Home Loan in Australia

What are those Factors that Affects your Borrowing Power for a Home Loan in Australia?

February 2, 2015

Whenever you wanted to buy a home in the near future, the first thing that comes to your mind is how much money you will be able to borrow from the lender. It becomes quite convenient if you know it beforehand so that you can direct your property search in that price range for the best option.

But how can you know your borrowing capacity beforehand? What factors influence and affect your borrowing limit?

The Factors

  • The Money You Earn & Spend
    Whichever lender pre-approve a home loan to you, they will carefully assess your income, ongoing loans, credit and store cards, your fixed expenses and debts and your repayment capacity for the desired home finance. Moreover, purchasing a property by clubbing-in someone else increases your borrowing capacity, but at the same time will increase the repayment amount as well.
  • The Way You Live. The Way You Spend
    While figuring out the amount of money you may borrow, the lender will also examine your living expenses and spending. In order to retain a good standard of living, you must ensure your mortgage repayments are paid duly.
  • The Credit History
    The one and only factor that is crucial and have greater influence in determining your borrowing power. Lenders look for reliable borrowers who pays all their bills, monthly payments and other financial obligations without any gaps or delays. Missed payments of credit cards and bills in past may go against your chance of getting an approval for the applied loan.Thus, it’s better to know your credit standing before applying for a loan. Get a copy of your credit history to identify any issues or problems and look for ways to improvise.
  • The Deposit In-hand
    More the money you put towards the deposit, more will be the chances to increase your borrowing capacity to obtain desired home finance.
  • Home Loan – The Type, the Term and the Rate
    The type of home finance you have applied for the desired loan term and interest charges may also influence your borrowing capacity.
  • The Possessions
    If you have assets like investment property or vehicles, it will significantly influence the borrowing limit decision of the lender.
  • The Property Value
    At the end, the worth of the property you wish to buy will also influence the amount a lender may lend you. To calculate the property value, the lender will conduct a valuation of the property and then determine how much funds can be lend to you.
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