14 Oct How much can I borrow?
If you’re entering the property market as a first-time home buyer, there are many elements to consider when it comes to your overall buying capacity and approach. The journey from beginning to end can feel overwhelming, particularly on your first time through, but by establishing at the outset how much you can borrow in your personal financial position, you can save yourself time and energy by avoiding rabbit holes which could prove impossible to secure finance wise.
So, how do you set yourself up with the information you need in regard to your borrowing capacity?
Here’s our easy list of things to consider and discuss with your lender or mortgage broker.
Evaluate your income
One of the most important considerations for any lender is gaining a full picture into your regular income, personal and household. If you’re applying as a couple, both of your incomes will be taken into account and considered against your capacity to service a home loan. Proving your income from all sources is an integral part of the loan approval process. If you earn money outside of a regular paycheck, your mortgage broker will be able to advise you on how to use this to strengthen your pre-approval or approval application.
Look at your expenses
Sitting down and making an honest list of your regular expenses is also a crucial part of giving your lender the oversight they need to make an informed decision. Don’t forget to take a look at the little things, whether it’s a Netflix subscription, regular coffee habit, gym memberships, or entertainment expenses. It’s also important to consider your yearly expenses, like electricity bills, car registration, annual holidays, and so on
The bonus in completing this review of your expenditure is that you may also find areas where you can cut back on your spending through some simple choices. When you’re applying for a home loan, every dollar makes a difference!
Lenders will take into account any financial liabilities you have at the time of application when they evaluate your overall borrowing capacity. If you’re carrying credit card debt, car debt, or any other kind of debt, these debts need to be factored in to the equation. This allows your lender to understand your overall committed outgoing expenses and payments against your income, showing them your capacity to safely and reliably make your home loan repayments, on time, every time.
Credit card limits
This area can catch people off-guard – not only will a lender look at your credit card debt, but they’ll also look at your overall limits. Even if you only have $1,000 of debt on a credit card with a $5,000 limit, the $5,000 limit will be taken into account as a part of your borrowing capacity calculations. Your mortgage broker will be able to advise you on the best course of action when it comes to lowering credit card limits, as removing this access to potential debt can be game-changing when it comes to your borrowing capacity.
If you need to know how much you can actually borrow for your purchase, contact Steven at 0488 814 148 or send us an email for a complimentary, no-obligation chat.