10 things you need to understand about your borrowing capacity

3 min read

10 things you need to understand about your borrowing capacity

When it comes to borrowing money from a lender or lending organisation, a borrower will only be able to borrow a certain amount of money. This amount is referred to as a person’s borrowing capacity. When it comes to borrowing capacity, there is no set amount because it varies depending on the people and their situations.

If you’re thinking about taking out a loan and hiring the best mortgage broker in Sydney, it’s a good idea to know how much money you can borrow. You will be more prepared for your loan application as a result of this. It will also assist you in managing your expectations for the amount of money you can borrow.

The Things You Should Know About Your Borrowing Capacity

1. Amounts offered by different lenders may differ:

Keep in mind that not all lenders will provide you with the same loan amount. The amounts may vary slightly depending on your situation and the precise type of information requested. Finance professionals can advise you on which lending institutions will be able to provide you with the funds you require.

2. Your Income Is The Most Crucial Component: 

Your income amount is one of the most important pieces of information you will provide loan providers. This will assist them in determining your ability to pay and calculating your borrowing capacity.

3. Your Investments And Savings Boost Your Borrowing Capacity: 

Your savings and equity will assist you to increase your borrowing capacity when you apply for a loan. These will be assessed against any other debt you may have, and will considerably assist you in obtaining a larger loan amount.

4. Your investment has a significant influence on your borrowing capacity:

Different banks and lenders have different standards for evaluating and enabling you to use specific funds for your deposit. The higher your deposit, the more likely a mortgage broker will be able to negotiate a reduced interest rate or waive costs for you. Most banks will require a 5% ‘Genuine Savings’ deposit in most cases.

5. Purchasing an investment property boosts your borrowing capacity:

When a first-time buyer applies for a loan for investment purposes, their borrowing capability will likely increase. This is because, in addition to your regular income, lenders will consider the rental income you will produce. An example of a first-time house buyer making an investment in real estate.

6. You can fix your credit problems:

Have you ever had a credit check done on you? These are excellent resources for resolving credit concerns. They can tell you if you have any bad debts or money owed to you, as well as whether or not your credit rating is good. From there, you may figure out what needs to be paid and whether or not your record has any inaccuracies.

7. Get Rid Of Other Debt Before Applying: 

If you have a significant quantity of debt, you should not anticipate being able to get a large amount of borrowable capacity. Waiting to reduce or eliminate your debt will help you demonstrate that you are a responsible borrower with the ability to repay your debts.

8. Lenders Mortgage Insurance (LMI) may limit the amount you can borrow:

If your deposit is less than 20% of the house value, you’ll almost certainly have to pay Lenders Mortgage Insurance (LMI). If you are unable to repay your loan and the sale of the property does not cover the outstanding loan sum, LMI protects the lender. The Mortgage brokers Sydney can assist you in determining the impact of LMI on your borrowing ability.

9. Consider your long-term financial objectives: 

It’s a good idea to structure your purchase around your long-term financial objectives and cash flows. If they expect their income to increase or if they receive a windfall of cash, many purchasers are more comfortable purchasing closer to their maximum borrowing capacity.

10. Remember about fees and charges: 

There are a variety of fees and charges associated with purchasing a home, including Stamp Duty, loan establishment fees, and legal costs. These expenses may have an impact on the amount of money you can borrow. A Loan Market broker can help you understand all of the hidden costs associated with buying and financing a home and factor this into your borrowing power calculation.


Knowing what to expect when applying for a loan is critical. Many distinct things can influence your borrowing capability. Knowing your borrowing capacity will help you plan for the maximum loanable amount you may be qualified for. Knowing your borrowing capacity will aid you in making decisions, particularly if you are taking out a mortgage loan to purchase your first house.

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