- lola@luminarfinance.com.au
- 45 Delawney St, Balcatta WA 6021
Buying a home is exciting, but one of the biggest questions for prospective buyers is: how much can I actually afford to borrow? Understanding your borrowing capacity is key to avoiding financial stress and ensuring your mortgage is manageable over the long term. This guide will help you break down income, expenses, and realistic mortgage planning so you can make informed decisions
An investment property loan is a type of mortgage designed specifically for purchasing real estate you don’t plan to live in yourself. Instead, the property is used to generate income through rent or future capital growth.
While they work similarly to standard home loans, investment loans often come with different conditions such as:
Borrowing capacity is the amount a lender is willing to lend you based on your financial situation. Lenders assess your capacity by looking at several factors, including:
Knowing these factors helps you set a realistic budget and prevents you from taking on a loan that stretches your finances too thin.
Start by adding up all your sources of income. This may include:
Lenders usually consider only reliable and consistent income when calculating borrowing capacity. If your income fluctuates, such as from freelance work or commissions, lenders may use an average over several months or years.
Next, consider your regular outgoings. These may include:
It’s important to be honest and realistic. Many buyers underestimate living costs, which can lead to financial pressure later. Lenders also factor in a buffer for unexpected expenses when calculating how much they are willing to lend.
Lenders don’t just look at income versus expenses. They also consider:
Being aware of these factors helps you understand why lenders might approve a lower loan than you expect.
To determine a comfortable borrowing amount:
Remember, just because you can borrow a certain amount doesn’t mean you should. Borrowing less than the maximum approved loan often gives you more flexibility, reduces stress, and allows for life’s unexpected costs.
Understanding your borrowing capacity is one of the most important steps in the home buying process. By carefully evaluating your income, expenses, and long-term financial goals, you can borrow an amount that’s realistic and sustainable.
Working with a mortgage broker can help you navigate this process, ensuring you make informed decisions and find a home loan that suits your needs. Planning carefully now can save you stress – and money – later
Fill in your details below to watch the full recording of “Pathway to Property” and gain valuable insights into navigating the property market.
Fill in your details below to watch the full recording of “Pathway to Property” and gain valuable insights into navigating the property market.
