Calculate Borrowing Power: A Guide for First-Time Buyers

Buying your first home is an exciting and wonderful experience but it is also one that can feel quite arduous, especially when you get down to business and ask the common question: “How much can I borrow?”
Borrowing power is basically how much you can borrow from a lending organisation. Your borrowing power depends on your current financial situation. It is affected by other variables such as your expenses, bank statements, assets and investments you may have and even external factors like the current market conditions, property market and interest rates.

In this guide, we will discuss the factors influencing borrowing power and how to calculate it and empower you.

Calculating Borrowing Power: Why Does it Matter?

Borrowing power is defined as the maximum loan amount available that is willing to be loaned to you by a lending institution such as a bank or credit union.

For first time buyers, the borrowing power is especially crucial. This is because the amount you get after you calculate borrowing power will be a deciding factor in your budget and narrow down the properties you can realistically pursue.

There is a further benefit to understanding your borrowing power. It can provide peace of mind by reducing financial stress and uncertainty during the home buying process.

What Influences Your Borrowing Power?

These variables have a bearing on your borrowing power:

• Income: A mortgage lender will want to assess the exact amount of how much you can afford to pay monthly. They will assess your income, any outstanding debts and other commitments you have that you may have.
• Expenses: After your monthly income, lending institutions will review your debts and current living expenses, for example if you have a child, school fees and maintenance as well as utility fees, if you rent or own your home. If your day-to-day expenditures are high then your ability to borrow and how much you can borrow will be affected.
• Credit History: Your credit history demonstrates your track record of paying on time and how much of a reliable borrower you are. If you are a consistent good payer then you could qualify for a bigger loan.
• Property Deposit: If you have plenty of savings that you can contribute to your property deposit then you can boost the amount you will have after you calculate borrowing power.
• Loan Term: Your loan term can impact how much you can borrow.
  Other Assets and liabilities: Existing assets and liabilities like investments will be considered and can help shape your lender’s decision.

Mortgage Loan Borrowing Calculator: Estimate Your Borrowing Power and Capacity

• Our Borrowing Power Calculator: Quickly calculate borrowing power with our online borrowing power calculator. Keep in mind that this tool provides an estimate of your borrowing capacity, not an exact figure. If you’d like to explore different loan scenarios, you can also try our mortgage loan borrowing calculator.
• Mortgage Borrowing Estimate: For a more accurate mortgage borrowing estimate, consult with a mortgage lender and consider pursuing pre-approval. This process will give you a clearer picture of how much you can actually afford to borrow.
• Professional Guidance: For personalised advice and a comprehensive understanding of your borrowing power, we strongly recommend consulting with a mortgage company like Professional Lending Solutions. We can help you calculate borrowing power and navigate the complexities of securing a mortgage.

Get Your Loan Pre-Approval and Work With Us At Professional Lending Solutions

A range of variables determines your borrowing power. Key considerations include your current income and expenses, but perhaps most importantly, your credit history. Thus, understanding these factors is crucial for effectively navigating the home buying process and having these positive financial indicators can generally lead to more favourable borrowing conditions.

At Professional Lending Solutions we are dedicated to ensuring you understand the process for loan approval and helping you achieve your financial goals. We have years of experience and expertise under our belt and personalised services.