How much can I borrow?

One of the most common questions we get asked is “how much can I borrow”? To avoid sounding cliche with a response, the answer to this question really does depend on a few key things.

To begin with a lender will take into consideration your personal circumstances. For example how much you earn, how much secured and unsecured debt you currently have, what your living expenses are and whether you have a partner or dependent children. All of these things will factor into your overall borrowing capacity.

Starting with income a lender will look at what you earning capacity is. This sounds basic and makes sense given that the lender will want some proof that you will be able to meet your new loan commitments. Income to be used for debt servicing purposes can vary whether you are a PAYG employee or self employed. It’s best to speak to your Broker more regarding this. Once income is determined the lender will then look at what existing commitments you have, such as personal loans, home loans or credit cards to name a few. Another thing the lenders take into consideration when determining borrowing capacity is what your living expenses are. Most lenders use a term called HEM which stands for Household Expenditure Measure. This is basically all of your living expenses, or a budget.

The only way to truly know how much you can borrow is to complete a pre-approval application with a lender. This will give you a good idea. These pre-approval’s are generally only subject to verification’s of all existing income, assets and liabilities and also a valuation to be completed on any new or existing properties.

My tips for getting fit to borrow - try to pay down or close as much unsecured debt as possible (credit cards, personal loans, personal debts) and save as much as you can over a 3 month period. By doing this it will show the lender that you are a reliable borrower.

This information is general in nature only and does not take into consideration your personal situation. It should not be used as a metric for potential borrowing capacity.