How Much Can I Borrow?
Are you searching for a home to call your own? If so and you are a first time buyer, you may be a little confused by how it all works. Even if you aren’t a first time buyer, the process of buying a home can be really stressful and complicated.
One of the main questions that homeowners have is ‘How much can I borrow?’ If you are pondering that very same question then below you will find out how this is usually worked out.
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State Custodians Standard Variable Offset Loan features zero fees, unlimited free redraw and 100% free interest offsetting. Awarded the 2011 Non bank Lender of the Year
- Interest Rate of 6.02%
- Comparison Rate of 6.23%
- Application Fee of $0
- Maximum LVR With LMI: 95%
- Minimum Borrowing: $150,000
- Maximum Borrowing: $1,000,000
How Your Circumstances Affect How Much You Can Borrow
The first thing that you need to understand is that different people will receive a different quote. This is because it is based upon your circumstances. The amount that a lender will allow you to borrow will vary based upon:
- How Much You Earn
- Whether You Have Any Savings or Deposits
- What Your Financial Commitments Are
- Your Credit History
Perhaps the most important thing that a lender will look at is what you are currently earning. Is your income enough to pay off the mortgage that you are looking at? You will need to be able to comfortably pay off the mortgage each and every month.
What this means to a lender is that ideally your repayments will be no more than 30% of your gross income. It is also advised that you add on top of this the cost for potential repairs and tax rates which can take it up to 40%.
These days your credit rating will also make a big impact on how much money you are offered. There are some lenders who will not allow you to borrow from them at all if you have a bad credit rating. This is something that you really need to keep in mind. Even if you are offered a mortgage, it will usually include much higher rates than if you had a good credit rating.
The lender will also look at what your current financial commitments are. What do you have to pay out and how much does that leave you with each month? Obviously you should have a minimum amount of outgoings.
Before you even think about applying for a mortgage, work out your income and expenses to see how much you have left over. You should have a good idea yourself of whether you can afford a mortgage.
If this will be your first home then it is important that you have a deposit. The amount that you need will differ depending upon the home that you want to buy. The more money that you can use as a deposit, the more likely you will be accepted for the loan that you want. Also, the more that you can pay upfront, the less the mortgage will cost in the long run.
Some lenders will also prefer it if you have savings too. This shows that if you run into problems paying back the loan, you will have savings as a backup. Not only that, but savings also show that you are good with your money.
Finally you need to understand that there are other costs involved when buying a property. These will be added onto the overall loan amount. It is vital that you do not make a guess on how much you can afford. Always get a pre-approval before you apply. Never over stretch yourself as that could end up in disaster. There are budget planners online that you can make use of.
Overall you should get as many quotes as possible before you settle on a mortgage provider. Different lenders will offer you a different amount of money and it will come at a varying cost. When you compare your options it gives you a chance to choose the most affordable lender. It’s also worth noting that there will be all kinds of fees on top of the actual mortgage.
Working out what you can afford to pay back is often much more important than knowing exactly what you can borrow in the first place.
Related posts:
- How Your Credit Rating effects how much you can borrow
- How much can I borrow? – Your Borrowing Power
- Home Loans – How Much Can You Borrow
- How Much Can I Borrow? Calculator
- How Much Can I Borrow For a Home Loan?
- How Much Should you Borrow
- How Much Salary Should You Have for a Home Loan?
- Refinancing Calculator
- Top 12 Mortgage Myths Exposed
- The Secret to Increasing your Borrowing Power
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