How much money can I borrow?

One of the first questions people ask when looking at buying a home, is ‘how much money can I borrow?’ To save time, and possible heart ache, it’s a good idea to find out how much you might be able to  borrow before you start seriously looking for a property.

How much money you can borrow will depend on a number of things – both from the perspective of the lender, and from your own personal perspective. While the numbers might add up from the perspective of a lender, you’ll need to ask yourself whether you are comfortable borrowing that amount and making the necessary repayments each month.

Here are 4 things that will help you work out how much money you can borrow.

1.     Your financial situation

When applying for a loan a lender will look at your financial situation. It’s a good idea to list all of your assets and liabilities so you can have a clear picture of where you are at financially. A lender will take into account the following:

Savings

How much you have saved for a deposit and your savings history will make a difference to the amount of money you can borrow. It’s important to remember the bigger a deposit you have, the less money you will have to borrow, and this can affect the amount of interest you will pay in mortgage repayments each month.

Income and expenses

Your income and expenses will have an effect on how much you can borrow. A solid track record of employment and a history of regular savings in your bank account will make it easier for you to get a home loan. Lenders want to see evidence of good financial management, to ensure they aren’t taking unnecessary risks. You can do this by using a separate savings account with a higher interest rate to make regular deposits and limited  withdrawals. *

Lenders will take into account any other loans you have and the repayments associated with these loans. As well as this, lenders will generally check bank statements for the last three to six months when assessing a loan application. This means it’s important to keep your bank account in order – ensure there are no late payments and that your account doesn’t get overdrawn.

Credit history

Most lenders will do a credit file check as part of a loan application – what does yours say about you? The details on your credit history file can mean the difference between having a loan approved or not. Your credit history will list any instances where you have applied for credit, the outcome of those applications and any credit default information registered by a third party. You can check your credit history via credit bureaus such as Equifax Pty Ltd (www.equifax.com.au).
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2.     Use a mortgage calculator

Mortgage repayment calculators can give you an indication of what your repayments might be for a particular loan amount By playing around with calculators, you’re able to consider how much you are comfortable paying each month in mortgage repayments. Remember, it’s important to not only make your mortgage repayments comfortably each month, but to also have enough money for emergencies or unexpected costs.

Our home loan calculator helps you estimate the true cost of your purchase. It takes into account expenses people often forget about when purchasing a property such as stamp duty, rates, insurance, maintenance and more.

3.     What kind of property

The kind of property you are looking at buying will have an effect on the amount you can borrow. A lender will take into account the value of the property. A valuation carried out on behalf of a lender takes into account the value of the property over the longer term, as well as any current trends in the market. Lenders use the property to secure the loan, so it’s important they can sell the property to recoup any costs should you be unable to pay mortgage repayments. For more information about property valuation check out our popular post on preparing your home for a valuation.

If you’re looking at buying a property to rent, the lender will most likely take into account the amount of rent you expect to  receive for the property as part of the overall loan application process.

4.     Talk to a lender

Talk to a lender to discuss your situation and to find out how much you can borrow. By talking to a lender you’ll find out exactly what they will require from you for an application, and they’ll be able to go through different types of loans, rates and loan amounts and discuss how they affect  mortgage repayments. You can visit one of our Heritage lending specialists in branch or phone our Queensland based contact centre on 13 14 22 to find out how we can help you with applying for a home loan. 

MasterCard Prepaid Management Services Australia Pty Limited (ABN 47 145 452 044, AFSL 386 837) arranges for the issue of the Multi-currency Cash Passport in conjunction with the issuer, Heritage Bank Ltd (ABN 32 087 652 024, AFSL 240 984). You should consider the Product Disclosure Statement for the relevant Cash Passport available at www.cashpassport.com.au before deciding to acquire the product. MasterCard and the MasterCard Brand Mark are registered trademarks of MasterCard International Incorporated.

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The information provided to you is general and may not be appropriate for you. Conditions, criteria and fees apply to products. Please consider the Guide to Heritage Deposit Products or the Guide to Heritage Credit Card Products (available in-branch, by phoning 13 14 22 or at www.heritage.com.au) before you decide whether a product is right for you.

* Home loan comparison rate based on a $150,000 loan over 25 years.  Fixed loan comparison rate applies only for loans with an LVR of 80% or less and a loan amount of $150,000 to $249,999.  WARNING: This comparison rate is true only for the examples given and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate.

Interest rates are on a per annum basis. Rates are correct as stated and subject to change without notice. Rates shown are for new loans and do not apply to switches or internal refinances.

Home Advantage Variable rates include discounts shown from the Standard Variable rate. Home Advantage Living Equity rates include discounts from the Living Equity rate. Discounts are based on total lending in the package. Discount Variable LVR rates are for new lending and include discounts from the Discount Variable Loan Rate.  Discounts are not available in conjunction with any other interest rate discount or special offer. All fixed rates are fixed for the period stated and revert to the variable rate applying at expiration of the fixed term. To approved applicants only. Conditions, criteria and fees apply.

Loan to Value Ratio (LVR) is the loan amount divided by the value of your security property (determined by Heritage Bank at assessment), multiplied by 100. Owner Occupied loans have a maximum LVR of 95%, Investment loans have a maximum LVR of 80% and Living Equity has a maximum LVR of 80%. Heritage is not accepting any new investment applications until further notice.

This advice has been prepared without taking into account your objectives, financial situation or needs. Because of this you should, before acting on this information, consider its appropriateness having regard to your objectives, financial situation or needs.

Generate a personalised Key Fact Sheet based on your loan amount, term and repayments. This tool is provided to help you compare home loans from Heritage with other financial institutions.

The information provided is intended as general information only. Blogs have been prepared without taking into account your objectives, financial situation or needs. Because of this you should, before acting on this information, consider its appropriateness having regard to your objectives, financial situation or needs. You should consider obtaining personal investment, taxation and/or legal advice before making any decision.  Please consider the Guide to Heritage Deposit Products and Guide to Heritage Credit Card Products (available in-branch, or at www.heritage.com.au) before you decide whether a product is right for you. All loans and credit cards are subject to application and approval. Conditions, criteria and fees apply and are subject to change without notice.