Borrowing Power Calculator

- May 10, 2025
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Calculate your home loan borrowing power based on your income, expenses, and current financial situation. This calculator provides an estimate of how much you might be able to borrow for a mortgage.

Income Details

£
£

Loan Details

%
years
%
Lenders typically assess your borrowing capacity at a higher rate to ensure you can handle future rate increases.

Existing Financial Commitments

£

Existing Debts

1
£
£

Additional Options

%
Maximum percentage of gross income that should go toward mortgage repayments.
%
Maximum loan amount as a percentage of the property value (lower ratio may avoid Lenders Mortgage Insurance).

About Borrowing Power

Borrowing power refers to the maximum amount a lender may be willing to lend you based on your financial situation. Understanding your borrowing power helps set realistic expectations for your property search and ensures you don't overextend yourself financially.

Factors That Affect Your Borrowing Power
  • Income: Your total household income, including salary, investments, and other sources.
  • Expenses: Your regular living expenses, which lenders estimate based on household size.
  • Existing Debts: Credit cards, personal loans, car loans, and other financial commitments.
  • Interest Rates: Current rates plus a buffer to ensure you can handle future rate increases.
  • Loan Term: The length of your mortgage affects your monthly payments.
  • Credit Score: A higher credit score may increase your borrowing power.
  • Employment Stability: Steady employment history improves your borrowing potential.
How Lenders Assess Borrowing Power
  1. Income Assessment: Lenders verify your income through pay slips, tax returns, or bank statements.
  2. Expense Calculation: Your living expenses are assessed based on declared expenses or standard benchmarks.
  3. Debt Serviceability: Lenders check if you can comfortably meet repayments at a higher "assessment rate."
  4. Debt-to-Income Ratio: Lenders examine your total debt obligations relative to your income.
  5. Loan-to-Value Ratio (LVR): The loan amount compared to the property value, affecting whether you need LMI.
Important Notes
  • This calculator provides an estimate only. Actual loan approvals depend on lender-specific criteria.
  • Different lenders have different policies and may offer varying loan amounts.
  • Consider seeking pre-approval from a lender to get a more accurate assessment.
  • Just because you can borrow a certain amount doesn't mean you should. Consider your comfort level with repayments.
  • Remember to account for additional costs like stamp duty, legal fees, and moving expenses.

Understanding the Borrowing Power Calculator

The Borrowing Power Calculator is a handy tool that helps you understand how much you can borrow for a home loan. By inputting your income, expenses, and Other Financial details, you can get a good estimate of your borrowing capacity. This can be incredibly helpful when you're planning to buy a property. Knowing your borrowing power can shape your home search and keep your expectations realistic.

Why Your Income Matters

Your income plays a crucial role in determining your borrowing power. The calculator takes into account not just your salary but also any additional incomes, such as bonuses or rental earnings. The higher your income, the more you may be able to borrow. For many, it’s essential to have a solid understanding of all income sources before applying for a loan.

Key Inputs for Accurate Results

  • Annual Gross Income: This is your total income before taxes.
  • Additional Income: Any extra money you earn can boost your borrowing potential.
  • Interest Rate: Current rates can affect how much you can borrow.
  • Loan Term: The length of your loan can change your monthly payments.

Your Financial Commitments

When using the Borrowing Power Calculator, it's also important to consider your existing financial commitments. This includes your monthly living expenses and any debts you may have. These factors can significantly influence how much you can afford to borrow. Lenders will look at your overall financial picture, so being honest about your commitments is key.

Understanding Debt and Its Impact

Existing debts such as credit cards, loans, or any other financial obligations can lower your borrowing power. The calculator allows you to enter various debts, including their outstanding amounts and monthly payments. Being aware of your debts is crucial, as lenders will assess your ability to manage repayments alongside your new mortgage.

Other Valuable Features of the Calculator

  • Debt Service Ratio: This shows the percentage of your income that goes towards debt repayments.
  • Loan to Value Ratio: This measures the loan amount against the property's value.
  • First Home Buyer Status: You can indicate if you're a first-time buyer, which may give you access to special grants.

Result Interpretation

Once you’ve entered all your details, the calculator will provide key results, including your estimated borrowing power and monthly repayments. These results are vital as they give you a clearer picture of what you can afford. Understanding these figures can help you make informed decisions about your mortgage and property choices.

Final Thoughts on Using the Borrowing Power Calculator

The Borrowing Power Calculator is a simple yet powerful tool for anyone looking to navigate the property market. It helps you sort through your finances and sets a solid foundation for your home-buying journey. Remember, while this calculator provides estimates, it’s always a good idea to consult with lenders or financial advisors for tailored advice.