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Borrowing Power Calculator
Looking for a new home and wondering how much can I borrow?
iSelect’s Borrowing Power Calculator gives you an indication of the maximum amount you may be able to borrow based on your income and expenses. However, it’s important to note that the amount is subject to lender approval.
To help you set a reasonable upper limit and find a home loan that’s right for your situation, the calculator will also show you what you’ll be paying back each month. You know your budget better than anyone, so make sure you’re comfortable with this amount. You’ll want to have some cash left over so you can save for a rainy day and have a bit of fun.
Use iSelect’s Home Loan Borrowing Calculator and save money!
How to use the Calculator
- Loan details.
- The interest rate, and
- Loan period.
- Income details.
- Choose whether you want to enter your income as a weekly, fortnightly, monthly or yearly amount.
- Is this a joint purchase, or are you flying solo?
- How many dependants (i.e. children under 15 of whom you’re the parent or guardian) you have, if any.
- Your after-tax income as per your selected time period.
- Your partner’s net income, if applicable.
- Any other income you receive; for example, dividends from shares.
- Loan repayments, such as for a car or personal loan, in weekly, fortnightly, monthly or annual amounts depending on the timeframe chosen above.
- The combined total limit of any credit cards, whether you use them or do not use them.
And the Borrowing Power Calculator will crunch the numbers for you.
The graph shows both the principal (amount you borrowed) and the total amount owed including interest, as well as calling out your maximum borrowing amount at that interest rate and the monthly repayments attached. The yearly breakdown tab shows the years of the loan, the interest paid per annum, the principal amount and the total amount owed.
Find out how much you can borrow:
Before you can set a realistic budget for buying your dream home, you’ll first need to find out how much you can borrow.
Your borrowing power depends on your income, assets and current living expenses, as well as the size of your deposit and credit history.
Here are three things to consider in order to potentially improve your borrowing power.
1. How much can you save for a home loan?
Living expenses have a way of eating into your cash flow, so keep a record of what you’re spending. You might be surprised to see where your money is going – and how much you can save.
Cutting back on large and unnecessary expenses might help boost your borrowing capacity, but you don’t have to be too strict with your budget – make sure there is a little wiggle room for things like holidays or brunches with friends.
2. How much deposit do you need for a home loan?
As a general rule, the more money you can put down upfront the better. Sometimes this isn’t an option, therefore a Low Deposit Loan might suit you – often referred to as a No Deposit Home Loan – although this shouldn’t be your first preference.
Not only does a bigger deposit mean you won’t have to borrow as much, it may also help you avoid paying Lenders Mortgage Insurance (LMI), which protects the lender if you default on your repayments.
You are typically required to pay LMI if you need to borrow over 80% of the purchase price, but even a 20% deposit may not cover stamp duty and other fees and charges associated with buying a property.
If you need to add these costs onto your home loan, you may end up over the 80% threshold and liable for LMI, so aim to save at least 25% of the purchase price to create a bit of a buffer.
3. How is your credit rating?
Potential home loan lenders will access your credit history to see if you can afford the loan you are applying for, and whether or not you are likely to repay it.
Having a bad credit history may reduce your borrowing power and can potentially increase your interest rate, so make sure you review your credit history every 12 months to correct any mistakes.
It’s also a good idea to try to avoid extending the limit on a credit card or taking out a loan for a new car in the months before applying for a home loan, as the number of times lenders request your report can impact your credit score.
Understanding your financial position is the first step to boosting your borrowing power. Budgeting carefully, setting a savings goal and building a strong credit history can all help take the stress out of applying for a home loan.
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