Key factors that can impact the amount a bank is willing to lend you
When it comes to borrowing money to purchase a property, there are several key factors that can impact the amount a bank is willing to lend you. While factors such as your annual income and deposit are well-known, there are several other lesser-known details that can play a significant role in determining your borrowing power. As a responsible lender, Mt. Everest Property understands the importance of considering these factors to ensure that our clients can service their loans without undue financial hardship.
One of the factors that banks take into account when assessing your borrowing capacity is your annual expenses. This includes the cost of your lifestyle and the number of dependents you have. If you have a large family, for example, your expenses are likely to be higher, which can impact the amount a bank is willing to lend you. To improve your chances of securing a favourable loan, it is advisable to reduce your living expenses several months before applying for a home loan.
Another important factor is your existing debt, including any student HECS-HELP debt, credit card balances, buy now pay later apps, or car loans. Banks consider these liabilities and may reduce your borrowing power accordingly. While having some debt is not necessarily a deal-breaker, it is important to manage your debts responsibly to maintain a healthy credit profile.
In addition to these factors, there are also several upfront costs associated with purchasing a property, such as stamp duty, legal fees, and transfer fees. These can add up to 7%-11% of the total purchase price of your property, which can impact your deposit and, in turn, your borrowing power. It is essential to factor in these costs and plan accordingly.
Finally, your credit history plays a crucial role in determining your ability to borrow money. Lenders use your credit score to assess your trustworthiness as a borrower and determine the amount they are willing to lend you and the interest rate you will pay. If you have any red flags on your credit report, such as missed payments or defaults, it is advisable to take steps to improve your credit score before applying for a loan.
At Mt. Everest Property, we work closely with our clients and mortgage brokers to ensure that we source a property that suits their individual financial situation. We understand the importance of considering all factors that can impact borrowing power, including annual expenses, debt, upfront costs, and credit history. If you need assistance finding a property or a mortgage broker, please contact us to find out how we can help.
*Please note that past performance is not an indicator of future performance. Mt. Everest Property has Real Estate agent licensed to source & sell property in Queensland. This post does not constitute financial advice, credit advice, legal advice or tax advice. Financial advice should be sought from a qualified financial adviser, credit advice from a qualified mortgage broker, legal advice from a solicitor & tax advice from a qualified accountant.