How much can I borrow ?
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The amount an individual or couple can borrow is determined by a number of factors.
  1. Annual Gross income (Before Tax Income)
  2. Valuation of the purchase (What the valuer reports the purchase is worth)
  3. Outstanding debts (car loans, credit cards and credit report)
  4. Number of dependants (how many children you have)

The most important issues for us as a lender are your ability to afford the loan, your ability to meet the current repayment requirements, your ability to meet future repayments should interest rates rise, how much you have borrowed compared to the valuation of the purchase and that you still have enough money to live your life with.

The general guidelines are:
  1. 30% of your annual gross income to cover loan repayments
  2. 80% should ideally be the amount you have borrowed compared to the valuation of your purchase. That is 80% of the cost of the purchase is made up by the loan and you have paid a 20% deposit. We can lend at a higher LVR (Loan to Valuation Ratio), even 100%, but 80% is ideal.
  3. A rough guide to what monthly repayments will be is 7.35 times the number of thousands you have borrowed.
  4. Another guide to what you can borrow is based on your annual gross income. That is 3.5 times your total gross income minus and debts and minus all credit card limits you have.

How to calculate what you can afford to borrow:
  1. Total up you Annual Gross Income, if you are buying with your partner add your partners income in as well. Multiply the figure by 3.5, if you want to be conservative multiply by 3.
  2. Minus any outstanding debt or loans, not credit card amounts.
  3. Minus the total credit card limits on all credit cards.
  4. Minus roughly $5,000.00 per dependant/child.
  5. Minus roughly $12,500 for an individual or $14,500 for a couple
  6. The amount left over is a rough indicator of what you can borrow.

Say you borrow $100,000. Your repayments per month would be around $735 and you would need an income of roughly $30,000 or more after you have taken away other debts and credit card limits. If you have dependants, children, this will also affect the figures as stated above.

Also remember that first home buyers are currently entitled to a Government Grant and that there are additional loan, house buying, costs that need to be taken into account. Those costs are legal fees for transfer of the property as well as legal costs for the mortgage (loan), the cost of valuing the property, Stamp Duty on the purchase of the property (a Government Tax) and the cost of moving in. If your LVR is over 80%, that is if you borrow more then 80% of the valuers value on the purchase, you will also need to pay LMI, Lenders Mortgage Insurance.

We as responsible lenders will take all this into account when appraising your loan to ensure you get a loan that you can afford based on the information you provide us with. Interviews and appointments are free but must be booked in advance.

 

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How much can I borrow ?