The Borrowing Power Calculator shows the amount of money you may be eligible to borrow based on your current financial position. It takes into account your income as well as expenses figures, plus the interest rate and length of the loan. The calculator then determines the total sum you may be eligible to borrow.
Use the following steps to calculate your borrowing power:
1. Enter your income details
2. Input your expenses details
3. Enter the loan details (interest rate and term of the loan)
4. Once these details have been entered, click the ‘Assumption’ button.
The result shown is the maximum amount you can borrow. You might even like to print off a copy to save as a reference.
The calculator gives you a very good indication of your maximum borrowing capacity. However, only a discussion with a lender or mortgage broker can give you a more exact amount.
Read on to discover some useful tips.
Lines of credit in your name that are not being used should be cancelled. The amount of credit you have taken out counts against you when lenders assess your borrowing power. Most mortgage providers assume that any credit taken out in your name is already maxed out.
Take advantage of offers such as interest free periods on balance transfers. Not only will this make things neater and more manageable, it also makes it more likely that you can reduce your credit card debt significantly in a shorter period of time.
Furthermore, if your credit card debt is limiting your borrowing power, take action by discussing this with us at Organic Home Loans. We can help you consolidate credit card debt.
Create a spreadsheet of all your income and expenditures, or try our budget planner. That’s everything – from weekly coffees to clothing, bills and rent. Once you have it all down, look at where you can reign things in. Do you really need Netflix and Stan? Could you make lunch twice a week instead of eating out? See where you can save and start doing it.
The fact that you are actively considering purchasing a home probably means that you are already in the process of accumulating savings. Keep going. Setting a budget and sticking to it will help you not only track your outgoings but also allow you to see where things can be reined in somewhat. If you don’t have the requisite 20% deposit you may well be required to pay LMI, or Lenders Mortgage Insurance.
Once you have assessed your borrowing power, cut down on your credit limits, set a budget and increased your savings, it’s time to find the best possible home loan for your needs.
One of our experienced mortgage brokers can help.
