How Much Can I Borrow?

Banks and other Lenders differ from each other in terms of standards - the process they go through to determine how much you can borrow could be specific to them.

This indicates that you could have a higher or lower borrowing capacity across different Banks and Lenders.

This is due to the level of risk that each Bank/Lender is willing to take for their Borrowers and the level of insurance they have independently. Some Insurers may require a stricter criteria for the Banks to follow.

The Banks calculate this based on a number of factors including:

• Your deposit size

• Your monthly expenses

• Any Liabilities/Debts that you have

• Credit Cards

• Any dependants/children that you have

• Bank Statements showing Savings

• Annual Salary for all Applicants

• Bank Statements showing Income

• Current Payslips & Employment Contracts

• Any Investments or other Assets that you own

Above are the common requirements that the Lenders will ask for, however there could be more depending on their specific criteria.

Banks/Lenders are obliged to calculate the Borrowers ability to make the repayments conservatively to ensure their security and your comfortability - especially in the case of an Interest Rate increase.

As above, there are many factors that can influence your Borrowing Power and it is important to educate yourself on how to boost and increase your borrowing.

Increasing your income will increase borrowing and it’s a good start. That could mean asking your boss for overtime or potentially a pay rise. If your current employer is long overdue to offer you a pay rise - you could start to look for another job.

Otherwise, if you have a part time job with some spare time, you could look for a second part time job if you choose to do so.

A higher income will be positive to your borrowing power, this could also include rental income. Therefore if you’re in possession of an Investment property, be sure to claim it as an asset so the Banks will use your Rental income in their calculations of your Borrowing.

Paying off your current debt will also increase your borrowing capacity. Debts and Liabilities decrease your borrowing power such as credit cards that you owe money on, your current home, any car loans and other loans.

Therefore paying these debts down within your capability is a good idea to allow yourself a higher Home Buying budget as it will free up a higher percentage of your income.

Choosing the right Lender for your needs could potentially increase borrowing also. There are Home Buyers with specific circumstances that some Lenders will assist with. If you are struggling to reach your desired borrowing capacity, this is where finding other lenders that suit your needs can support a higher borrowing.

Spending habits is an important factor when Banks and other Lenders calculate your borrowing. Having good conduct (healthy spending habits) is important; when the lenders review your bank statements they are looking for bad conduct and credit scores - this could be consistent spending at the local TAB or defaulting on previous loans in the past.

Stable Employment will positively assist a higher borrowing also, as it shows the bank that you are reliable with your income. Manny Lenders prefer seeing that you have remained in the same job for at least 3 months beyond your probationary period, or alternatively, at least in the same industry.

A Large Deposit of Genuine Savings helps the banks see that you are good at managing your money, and will allow them to increase your borrowing. This is also due to a larger deposit, and a lower LVR that you won’t need to borrow as much, therefore you could match your borrowing capacity.

Overall, there are many positive steps to take in regards to beefing up your borrowing capacity. Keep in mind, the Banks are seeking the level of risk involved in lending to the Borrower - therefore the healthier your financial situation appears, the more they will allow you to borrow.