Borrowing Power/Capacity
One of the most frequently asked questions in home finance is – how much can I borrow? Your borrowing power/capacity will give you a good idea of how much you can borrow to purchase property.
Your borrowing capacity will vary between banks and lenders because they all use different methods to assess your capacity and have different lending criteria. As a guideline, when determining how much you can borrow banks and lenders will generally look at:
- Credit card limits
- Income and types of income e.g. casual, contract, full-time, self-employment
- The size of the loan compared to the property value
- Number of dependents and their situation
- Type of loan
- General living expenses, and
- Existing asset position (including the size of your deposit)
Tips to Boost Your Borrowing Capacity
- If possible pay off and close any credit card or overdraft facilities
- Do the sums and stick to a budget to improve your deposit and savings history
- Pay off outstanding term debts (e.g. personal loans)
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