What is Borrowing Power?
Borrowing power is essentially your financial capacity to get approved for a home loan. It signifies the maximum amount of money a lender is willing to lend you.
Before you get approved for a home loan, lenders will thoroughly assess your financial situation to ensure you can comfortably manage repayments. This assessment considers various factors, such as your income, expenses, existing debts, credit history and assets.
The lender’s assessment will determine your borrowing power, giving you a clear idea of the price range within which you can search for properties.
Factors That Affect Borrowing Power
Understanding the factors that shape your ability to get approved for a home loan is key. Various factors come into play, from your income to existing debts to your credit history and assets.
- Income: A higher and more consistent income could enable you to borrow more.
- Debts and financial commitments: Large existing debts can decrease borrowing power.
- Living expenses: High expenses may signal instability to lenders, lowering your borrowing power.
- Credit history: A good credit history indicates reliability and may increase borrowing power.
- Assets: Tangible and intangible assets add to credibility and borrowing capacity.
- Deposit size: Larger deposits reduce lender risk, meaning you may be able to borrow more.
- Home loan type, term and interest rate: Lower fees and interest rates increase borrowing power.
- Value of the property: Property valuation influences the maximum loan amount.
You can estimate how much you can borrow using our Borrowing Power Calculator. Or you can contact us to get a better understanding of your borrowing power.
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