Borrowing Power Calculator

- May 10, 2025
| |

Calculate your home loan borrowing power based on your income, expenses, and current financial situation. This calculator provides an estimate of how much you might be able to borrow for a mortgage.

Income Details

£
£

Loan Details

%
years
%
Lenders typically assess your borrowing capacity at a higher rate to ensure you can handle future rate increases.

Existing Financial Commitments

£

Existing Debts

1
£
£

Additional Options

%
Maximum percentage of gross income that should go toward mortgage repayments.
%
Maximum loan amount as a percentage of the property value (lower ratio may avoid Lenders Mortgage Insurance).

About Borrowing Power

Borrowing power refers to the maximum amount a lender may be willing to lend you based on your financial situation. Understanding your borrowing power helps set realistic expectations for your property search and ensures you don't overextend yourself financially.

Factors That Affect Your Borrowing Power
  • Income: Your total household income, including salary, investments, and other sources.
  • Expenses: Your regular living expenses, which lenders estimate based on household size.
  • Existing Debts: Credit cards, personal loans, car loans, and other financial commitments.
  • Interest Rates: Current rates plus a buffer to ensure you can handle future rate increases.
  • Loan Term: The length of your mortgage affects your monthly payments.
  • Credit Score: A higher credit score may increase your borrowing power.
  • Employment Stability: Steady employment history improves your borrowing potential.
How Lenders Assess Borrowing Power
  1. Income Assessment: Lenders verify your income through pay slips, tax returns, or bank statements.
  2. Expense Calculation: Your living expenses are assessed based on declared expenses or standard benchmarks.
  3. Debt Serviceability: Lenders check if you can comfortably meet repayments at a higher "assessment rate."
  4. Debt-to-Income Ratio: Lenders examine your total debt obligations relative to your income.
  5. Loan-to-Value Ratio (LVR): The loan amount compared to the property value, affecting whether you need LMI.
Important Notes
  • This calculator provides an estimate only. Actual loan approvals depend on lender-specific criteria.
  • Different lenders have different policies and may offer varying loan amounts.
  • Consider seeking pre-approval from a lender to get a more accurate assessment.
  • Just because you can borrow a certain amount doesn't mean you should. Consider your comfort level with repayments.
  • Remember to account for additional costs like stamp duty, legal fees, and moving expenses.

What is the Borrowing Power Calculator?

The Borrowing Power Calculator is a handy tool designed to help you understand how much you can borrow for a home loan. By entering details about your income and expenses, you can get an estimate of your borrowing capacity. This is useful for setting realistic budgets when searching for a new property.

How Does the Calculator Work?

Using the calculator is straightforward. You'll need to input information about your Financial situation, including:

  • Your annual gross income and any additional income
  • The interest rate for your loan
  • The length of the loan term
  • Your monthly expenses and existing debts

Once you fill in these details, the calculator will provide an estimate of your potential borrowing power.

Understanding Your Results

After calculations, the Borrowing Power Calculator presents several key figures. You will see your estimated borrowing power, which indicates the maximum amount you might be able to borrow. Additionally, it provides a breakdown of monthly repayments and possible property price ranges based on your inputs.

Why is Borrowing Power Important?

Knowing your borrowing power can help you manage your finances better. It ensures that you don’t overstretch your budget while trying to purchase a home. This information can guide your property search and help you avoid financial stress. It’s a critical step for both first-time buyers and seasoned investors.

Factors Influencing Borrowing Power

Several factors can affect how much you can borrow. Here's a quick look at what lenders consider:

  • Your total income, including salaries and Other earnings
  • Your ongoing living expenses and number of dependents
  • Existing debts, like credit cards or loans
  • The current interest rates and loan term you choose
  • Your credit score and employment stability

These elements all play a role in determining your borrowing limits.

Using the Calculator for Joint Applications

If you're applying for a mortgage with another person, the calculator can accommodate joint applications. You can enter both applicants' incomes, which can significantly increase the amount you might be able to borrow. This feature is particularly helpful for couples or business partners looking to invest in property together.

Common Misconceptions About Borrowing Power

Many people misunderstand what borrowing power truly means. It doesn’t guarantee that you will receive a loan for the full amount. Here are some common misconceptions:

  • Higher borrowing power means you should borrow as much as possible.
  • All lenders use the same criteria to determine borrowing limits.
  • Your borrowing power won’t change based on future income changes.

Understanding these points can help you make more informed decisions.

Final Thoughts on the Calculator's Role

The Borrowing Power Calculator is an essential tool for anyone looking to buy a home. By giving you a clearer picture of your finances, it helps you plan better and avoid potential pitfalls in the mortgage process. Whether you're a first-time buyer or a seasoned investor, using this calculator can lead to more confident financial decisions.