Borrowing power calculator

How to use our borrowing power calculator

Your Mortgage's borrowing power calculator considers the same factors that banks and lenders do when contemplating your borrowing capacity ahead of offering you a home loan.

There are three key pieces of information needed to use this calculator: your annual income, monthly expenses, and your ideal loan details.

• Annual income
  Simply provide details of all your income streams, including your pre-tax salary, rental income, and any other regular income sources.

• Monthly expenses
  After that, enter information regarding your overall day-to-day expenses, existing loan repayments, and any other financial commitments. If you're unsure of your exact expenditure, simple provide an estimate.

• Loan details
  Lastly, fill in the details of your ideal home loan, including the interest rate and loan term.

Unsure about what kind of home loan you might be eligible for? You can compare some of the lowest-rate mortgage products below.

How much can I borrow?

The amount of money a lender is willing to provide you via a home loan is known as your borrowing capacity or borrowing power.

The main factors that determine your borrowing power are your income, expenses, and the size of your deposit.

Lenders will likely also consider whether you have any existing debts, if you're using a guarantor for your home loan, and the interest rate on the mortgage product you're applying to.

Here's how these factors can impact your borrowing capacity.

Income and expenses

The more income you can prove, the greater your borrowing capacity is likely to be. Ultimately, a lender just wants to see that a potential borrower can meet their expected repayments relatively painlessly.

On the other end of the spectrum are your expenses. If your expenses are greater than your income, your borrowing capacity will probably be low (if existent at all) as a lender will likely assume you're unable to manage home loan repayments.

Interest rate and loan term

Another factor that will determine your borrowing power is the interest rate on the mortgage you're applying for.

The interest rate and length of a loan largely determine how much your regular repayments will be. Your bank or lender will likely want to see that you can meet your repayments, and then some.

Existing credit cards and loan repayments

Finally, your credit card, use of buy now pay later (BNPL) products, and existing loans can also lower your borrowing capacity.

A lender will likely look at any and all debt you have access to and remove its value from the figure it would otherwise lend you.

And yes, it considers 'accessible' not 'drawn down' debt, so if your credit card has a limit of $20,000, your borrowing capacity could be $20,000 less, even if you never use card. It's the same with BNPL products, so it might be worth shutting down your Afterpay account before applying for a home loan.

Can I increase my borrowing power?

Borrowing at the tippy-top of your capacity can be a dangerous game - you don't want to overstretch yourself financially and struggle to meet your repayments!

Though, if your dream home demands you borrow more than you can right now, there might be ways you can boost your borrower power. Here are a few:

• Save a bigger deposit
  The bigger your deposit is, the bigger your borrowing power might be. That's because lenders typically like to see a consistent record of savings. Not to mention, a larger deposit may reduce the amount you need to borrow.

• Pay off your debts
  Existing debts reduce your borrowing capacity. By paying off personal loan or car loan debt, or closing credit cards and BNPL accounts, you might be able to bolster the amount you can borrow to buy a home.

• Enquire with different lenders
  If your preferred lender won't quite stretch to your budget, it might be a good idea to enquire with another to see if it will. However, it's worth bearing in mind that making multiple home loan applications in a short space of time could dent your credit score.

• Reduce your spending
  Trimming your spending for a few months could provide a double benefit, helping you save for a larger deposit while also increasing your borrowing power.

• Reduce your credit limits
  Cancelling unused credit cards and lowering the limit on those you keep could improve your borrowing power, as lenders will generally reduce your borrowing power by the full limit on any credit card you hold.

• Increase your income
  Increasing your income is a great way to boost your borrowing capacity. It could be worth considering taking on extra shifts at work, getting a second job, or negotiating a pay rise.