“How much can I borrow” is normally the first question you ask yourself when you are wanting to purchase a property or seeking a change to your current loan structure.
The amount you can borrow is determined by a number of factors. Whilst you cannot be 100% certain of what each lender will require, there are key considerations most lenders will look into when assessing your ability to meet your repayments, and thus, whether or not they will grant you a home loans.
Before a lender will grant you a home loan, they will firstly consider your income stream, less any existing financial commitments, less your living expenses.
Lets look at your income
- If you’re PAYG, we will need confirmation of this by way of latest 2 payslips, plus Payment Summary for previous year
- If you’re Self-Employed, we will require your last 2 year’s tax returns, Notice of Assessment plus Financial statements if your entity is a company
- If you own a rental property, we will require confirmation of this by way of rental statements
Lets look at your financial commitments
- If you have a home loan, we will require your latest current statements
- If you have any personal loans or car loans, we will require your latest current statement
- If you have credit cards or store cards – we will require your last 3 months statements. All lenders will take 3% of your credit card limits regardless of how much debt you’ve accumulated on your credit cards because the banks know that credit card limits can be used at some point in the
Why do we require 3 months of credit card statements? This is to compare transactions on these statements against your declared living expenses.
- We will require your last 3 months transaction statements to confirm deposit of your salary, plus once again, compare these transactions against your declared living expenses
Lets look at your living expenses
When working out your borrowing capacity, the lender will also consider your living expenses and the cost of maintaining your lifestyle. They look into these areas because they want to ascertain if you can truly afford the repayments whilst still maintaining the lifestyle you’ve become accustomed to.
Beware of those continuing small expenses, a small leak can sink a great ship!!
Discretionary spending is something we can certainly look at if you plan to make adjustments to your lifestyle to meet the new financial commitment.
Working out your true borrowing capacity can be rather daunting for yourself, that’s why you need to engage in experts like us, as we have the tools to help you quickly.
As the law requires us to lend you money responsibly, we’ll need to perform a thorough check to ensure you’re qualified for the loan you are applying for.