Every lender has their own formula for calculating your borrowing power, and they generally look at six main factors.
- Deposit - the larger your deposit, the more you can borrow and the less interest you’ll have to pay on your loan.
- Income – this is not just how much your household brings in, but how much is left for home loan repayments after the bills and day-to-day expenses are paid.
- Level of debt – how much you owe on other loans and credit cards will also influence your available income.
- Savings history – having a savings history of at least 3 months demonstrates to a lender that you’ll be able to manage your home loan repayments.
- Credit rating – a sound credit rating is one of the first things lenders look at, as it is based on your borrowing and repayment history.
- Home loan term – a lender will look more favourably at a longer loan term, but remember it will mean you pay more interest over the life of the loan.
- Property value - a lender may conduct a valuation of your chosen property to determine the amount they are willing to lend you.
You can get an upfront estimate of your borrowing power with Tic:Toc with our borrowing calculator.
Related articles from our Home loan guide
Borrowing power explained
How credit scores affect your home loan application
Why home loans are rejected