Working out how much to borrow when buying property

The Reserve Bank of Australia (RBA) increasing official interest rates 12 times since May last year – taking the cash rate from a record low 0.1 per cent to 4.1 per cent – has not only had an impact on existing mortgage holders but made life more difficult for those looking to take out a new home loan or refinance an existing one.

As interest rates went up it also impacted consumer borrowing power, with the RBA increases estimated to have reduced borrowing power by approximately 30 per cent.

Lenders assess the borrower’s ability to service the loan with a 3 per cent buffer loaded to existing variable rates, so as rates go up, borrowing power reduces.

While this reduction in borrowing power may seem a daunting hurdle to overcome, a mortgage broker can help you obtain a home loan for the amount you require.

There is so much going on in the lending market at the moment that an everyday Australian won’t have the knowledge necessary to make an informed decision when selecting the right loan for their needs. It’s important to have an expert by your side who is up to date with the latest developments in the market and who understands your needs to be able to deliver the finance solution that is in your best interest.

A broker can investigate your borrowing power with different lenders, who when considering your borrowing capacity will assess criteria such as your income, savings, credit history, debts, spending habits and expenses as well as your family situation.

Brokers know that every home loan on offer will have different fees, interest rates and features, while lenders can have different methods of calculating your borrowing power.

Brokers will advise on whether you are jeopardising your chances of securing the loan you desire by spending too much money. If you have a good credit score and a decent deposit saved, you will tick all the right boxes with lenders who may even let you borrow more because you pose less of a financial risk.

If you are concerned about your borrowing power, get in touch with us today!