Q: What are the factors that can affect how much home loan I can borrow?
- Income and expenses
One of the main factors that will affect how much home loan you can borrow is your income and expenses. Lenders will look at your income to determine how much you can afford to repay each month. They will also take into account your expenses, including any existing debts, to ensure that you can comfortably afford to make your mortgage repayments.
- Employment status
Your employment status can also affect how much home loan you can borrow. If you’re a full-time employee with a stable income, you may be able to borrow more than someone who is self-employed or a casual worker.
If you’re self-employed, lenders may require additional documentation to verify your income, and this can impact how much you can borrow.
- Credit history
Your credit history will play a significant role in determining how much home loan you can borrow. Lenders will look at your credit report to assess your creditworthiness and determine whether you’re a high-risk borrower.
If you have a good credit history, you may be able to borrow more than someone with a poor credit history, even if you have the same income and expenses.
- Loan-to-value ratio
The loan-to-value ratio (LVR) is the ratio of the loan amount to the value of the property. Lenders will use the LVR to determine how much they’re willing to lend you.
If you have a higher deposit, you may be able to borrow more because the LVR will be lower. Conversely, if you have a lower deposit, you may be restricted in how much you can borrow.
- Interest rates
Interest rates will also impact how much home loan you can borrow. Higher interest rates will mean that your repayments will be higher, and this can impact how much you can borrow.