Here at No1 Property Guide, the first step of our process is helping you understand your factual new home options. And a key part of this is answering the common question ‘what is my borrowing capacity?’
Answering this question early in the process allows us to give you all of your factual options. It also means you can make an informed decision around whether you stay renting or become a homeowner.
How No1 Property Guide Calculates Your Borrowing Capacity
Calculating your borrowing capacity at No1 Property Guide is actually an incredibly simple process. By collecting some basic details from you, our New Home Consultants will assess your situation and accurately calculate your borrowing power.
The biggest difference between our calculation and a borrowing power calculator from the bank is the accuracy. Using a generic calculator will only give you a very rough estimate. It won’t take into account lending policy, your specific circumstances or even additional income you might have.
Understanding Your Borrowing Capacity
When it comes to calculating your borrowing capacity, we focus primarily on your income vs debts. We’re able to do this because of Darren’s no or low deposit new home system. With no need for a 20% deposit, we simply assess your borrowing power by calculating what you can afford to repay.
It’s important to understand that your borrowing capacity isn’t a pre-approval or a guarantee. There are a lot of factors that can affect your borrowing power. And while our calculations are accurate, if anything changes or you take out a new loan, it will have an impact on the amount.
How Can I Improve My Borrowing Power?
Sometimes, your borrowing capacity won’t be high enough to get into the market. Luckily there are ways our New Home Consultants can help you increase your borrowing power and potentially get you into your new home!
Reduce Debts & Expenses
Where possible, cutting any debts and expenses will go a long way to increasing your borrowing capacity. Things like personal loans, credit cards and car loans all have a big impact on what you can afford.
Cancelling or reducing your credit cards is a major boost, even if you owe nothing at the time. Lenders consider the maximum limit of your card when assessing you. So reducing your limits, or even getting rid of your credit cards altogether is a plus.
Having multiple debts or loans will impact how much you can afford as well. Our pre-qualification assessment is based on your income vs debts. So if your income is taken up by other financial commitments, that will reduce what you have to put towards your mortgage. If possible, paying off any existing loans is the best move. But when that isn’t an option, you might want to consider debt consolidation.
By consolidating all of your debts into a single, fixed-rate, low-interest payment, you could potentially cut your expenditure and increase your borrowing capacity at the same time!
Working with our sister company Loantec, our New Home Consultants can potentially help you consolidate your debts and reduce your expenditure.
Adding Another Applicant
If your income alone isn’t enough, then consider adding another applicant! Having someone else join you on the application is one of the easiest ways to increase your borrowing capacity.
Increase Your Income
It’s the most obvious of all your options, but increasing your income is a surefire way to increase your borrowing capacity. Whether it’s taking a second job, getting a raise, or doing some freelance work, an increase in your income will lead to an increased borrowing capacity.
Will My Age Affect My Borrowing Capacity?
Yes, your age can affect your borrowing capacity. When calculating home loans, most lenders will use a 25 or 30-year loan term. This is also under the assumption that you’ll be able to pay off the loan throughout that whole period.
Older applicants, around 50 or older, face shorter loan terms when applying for a mortgage. This means you’ll have a shorter time to repay the loan, and reduces the total that lenders are willing to lend you.
Answer “What is My Borrowing Capacity?” at No1 Property Guide
If you want to finally know the answer to ‘what is my borrowing capacity?’ then contact the New Home Consultants here at No1 Property Guide. By assessing your income versus your debts, along with Darren Walters’ no or low deposit new home system, we can help you discover exactly what your borrowing capacity is.