Common questions
What is borrowing power?
Borrowing power (or borrowing capacity) is the estimated amount of money a lender may be willing to lend you for a home loan. It is based on your income, expenses, debts, and other financial factors, as well as the lender's criteria and current interest rates.
How is borrowing power typically calculated by lenders?
Lenders calculate borrowing power by assessing your ability to service a loan. They look at your net income, subtract living expenses and existing debt repayments, and then apply a serviceability interest rate (often higher than the actual rate) and other criteria to determine the maximum loan amount you can afford.
What key factors affect my borrowing power?
Key factors include:
- your gross and net income
- your regular living expenses
- existing debts such as credit cards, personal loans and car loans
- the number of dependents you have
- the loan term
- current interest rates
- the lender's specific lending policies and credit assessment criteria
How can I potentially improve my borrowing power?
You might improve your borrowing power by:
- reducing your existing debts
- lowering your credit card limits
- cutting back on discretionary spending
- increasing your income
- saving a larger deposit
- looking for a loan with a longer term or lower interest rate
It is best to speak with a mortgage broker or lender for personalised advice.
This calculator gives an estimate only. What a lender will actually lend you depends on its own criteria and on current interest rates, so speak with a mortgage broker or lender for personalised advice.