Borrowing power calculator
Find out roughly how much you can borrow from the bank before you apply for a home loan.
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Finder's borrowing power calculator can give you a quick estimate of how much you may be eligible to borrow for your home loan. Just enter a few details about your income, debts and expenses, plus information about the home loan you're looking at, and we'll give you an estimate.
You may not have a specific home loan in mind yet, so just put in a hypothetical interest rate and loan amount based on your own borrowing situation. If you need a clearer idea of current home loan interest rates, check out the rates in the table below the calculator as a guide.
To use this calculator you can input a loan term (30 years is the most common choice), your income and select single or joint application depending on whether you are applying as a couple or not. You can input your spending in the expenses fields (just use the other loans field).
Please note that this calculator provides very rough estimates and Finder is not a mortgage lender. It's a good idea to use multiple borrowing power calculators to get a better understanding of what you might be able to borrow. And if you need more help you can also talk to a professional mortgage broker.
Check out some up-to-date home loan rates
How to use the borrowing capacity calculator
Finder's borrowing power calculator is very easy to use. Just enter the following details, and if you're not sure just put in an estimate:
- Term. This is the length of the home loan. Most people pick between 25 and 30 years (choose 30 if you're not sure about this for now).
- Interest rate. The home loan interest rate determines your repayment costs. If you're not sure, pick a rate from the loans table on this page.
- Application type. Pick single application if you're on your own and joint if you're applying as a couple.
- Income. The calculator asks for gross income, meaning how much you earn before tax and other expenses.
- Expenses. Put in an estimate of your monthly debt payments. There's no expenses field but you can put an estimate of your monthly spending in the "other loans" field.
- Dependents. If you have any children under the age of 18 put the number of children in this field.
The result includes an estimate of how much a lender may be willing to lend you, plus a breakdown of what that looks like as monthly repayments. And then it gives you the total interest you will end up paying on top of the loan amount itself.
How much can I borrow and how big should my deposit be?
Your deposit size is an important factor in determining your actual borrowing power, depending on how a lender calculates borrowing capacity.
Having a larger deposit relative to the amount you can borrow helps your chances of getting a loan approved. However, many lenders will approve your loan if you have just a 5% deposit saved.
But if you can save up to 20% you will be in a better position to borrow money. Borrowers with low deposit home loans (under 20%) usually have to pay lenders mortgage insurance, which can add thousands to their borrowing costs.
Remember that you also need to account for other costs when purchasing a home, which can include:
How to choose an amount you can repay in just 15 years
Max Phelps, founder of Golden Eggs and creator of the FIVE 2 Money Diet
Max Phelps says it's possible to pay off your home loan is half the time of a standard 30-year loan, and it all starts with borrowing the ideal amount.
"Pick a purchase price you can dominate, by borrowing well within your means," he advises.
"Banks assess your borrowing using an 'assessment rate' of over 5%, which means they make sure you can afford the repayments based on a 5% interest rate. So if you're only paying 2-2.5%, you should be able to pay off the loan – or build an offset up with savings to match the [outstanding] loan amount – in 15 years, should interest rates stay low for that long."
He suggests you use an online calculator and set the loan term to 15 years, the interest rate to current advertised rates and look for the loan amount that represents no more than half your net income.
For instance, based on your income, you might be eligible to borrow $950,000 over 30 years. But if you nudge the loan term down to 15 years, your borrowing power shrinks to $640,000.
- Buy a property worth around $700,000
- Using a 10% deposit
- Take out a 30-year loan
- Make extra repayments every single month, equal to the amount you'd pay on a 15-year loan
By following this strategy, you'll own the home outright in half the time.
"If interest rates do go up in future, you'll be grateful for every extra dollar you put in while they were low," Phelps adds, "because you'll have built up a buffer to help you cope with the increased cost of your mortgage."
Can I boost my borrowing capacity?
You should never try to borrow more than you can comfortably afford to repay. But every lender has their own idea of how much money they can lend you. So taking some simple steps to increase your borrowing capacity is not a bad idea.
Here are some quick tips:
- Save a bigger deposit. The more you have saved the stronger your position. A good savings history will also tell a potential lender that you're likely to be able to keep up with regular repayments. If you're a first home buyer you may be entitled to the First Home Owners Grant (FHOG) which can form part of your deposit.
- Sort out your debts before applying. Debts count against your borrowing power, especially high-interest debts. You don't need to instantly pay off all your debts (you don't want to deplete your deposit savings) but making regular repayments to reduce them is essential.
- Cut back on your spending. A few months of careful spending will make you a stronger applicant. Draw up a budget and examine areas where you can cut back.
- Talk to multiple lenders. Every lender will give you a different borrowing power estimate and it's wise to look at multiple options (don't apply, just enquire).
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I've got a good sense of my borrowing power - what's my next step?
Once you have a clear idea of your borrowing capacity it's time to look at your deposit, start searching for properties and research your home loan options.
The home buying process is unique for every buyer. The steps below can guide you but you don't have to follow them in any strict order. For example, you may already have decided on your lender or saved your deposit.
- Work out your budget. With a clear idea of your borrowing power you can determine a realistic borrowing amount for you (even if a lender says they'll lend you $900,000 you may not be prepared to spend anywhere near that much). Think about how big your deposit can realistically be and factor in other costs like stamp duty.
- Your deposit. Building a deposit is the key to getting a loan. You can get a home loan with a low deposit (at least a 5% deposit), though 20% is better. Your deposit, along with your borrowing power, ultimately determine your loan size.
- Property search. With your price range and deposit in mind you can start looking for properties with a more accurate sense of what's realistic for you. Narrow down your suburbs and the type of property you're looking for. Go online to see listings, track sales in a property search app and start going to open inspections to see places for yourself.
- Compare mortgages. You always want a loan with a low interest rate. And you need to decide whether you're looking for a fixed rate or a variable rate loan. It's worth looking at several lenders before applying with one (some lenders may be reluctant to lend in certain postcodes if you're buying a unit, for example).
If you need more help getting a home loan you can also have a free chat with a professional mortgage broker.
Do lenders publish their borrowing capacity calculation methods?
Every lender calculates things like your expenses differently, although they often use the same basic method. This means every lender gives you a different borrowing amount when you use their calculators.
Unfortunately banks keep their lending criteria a secret from borrowers. This means that while some borrowers can qualify for a loan, other borrowers might not qualify, even though they might look as promising as the other candidate.
Will my credit score affect my borrowing power?
One factor that isn't captured in a borrowing capacity calculator is your credit score. But when it comes to the application then your lender will look at this too. That's why it's a good idea to check your credit score before you apply.
What do I need in order to actually apply for a home loan?
Once you reach the home loan application stage you will need to gather some information about yourself, your finances and the property you are buying. You can check out our detailed guide on preparing home loan application documents, but in general you will need:
- ID documents
- Recent bank statements or other proof of income
- The address of the property you're buying
- Information about your assets and debts
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