How much can I borrow?

As a rule of thumb your debt repayment costs including the new mortgage repayments should be somewhere around 30-40% of your income. When working this out assume that any facilities you have are fully drawn (as that’s what the Bank will do). The best thing you can do, if you’re trying to work out your maximum is to go and speak with a mortgage adviser. Yes, I know I’m one but if you’re cutting it fine they will be able to guide you on which bank will suit you best as the difference between lender maximums for any given unique situation can vary pretty wildly. And if you go around applying yourself to different banks you’ll impact your credit score with all the different enquiries.

Do mortgage calculators work?

There are so many online calculators but are they really reliable? Well, yes. And no. They can give you an indication, or ball park of what you may be able to borrow. The calculators will have to make a few assumptions about you and assumptions won’t take into consideration your whole picture. Usually the information inputed is pretty basic and all of the following will impact the maximum amount you can borrow:

• income (what you put may not be what the bank will accept)

• other debts, including any undrawn debts, payments, interest rates and term.

• household composition / number of dependants - (based on this the Bank will make some calculations about the minimum amount your household will need to live off for things like food transport utilities etc)

• child support

• age (or more importantly time to retirement / earning years)

• deposit amount

• other income

• number of cars

• boarder income

• other fixed necessary expenses for things like insurance, rates, childcare, school fees

Many of the online mortgage calculators use similar formulas employed by Banks, however it’s important to recognise their role as tools for initial general information rather than substitutes for real financial advice. Engaging with an experienced professional, such as a mortgage adviser, will mean you can consider your options from a wide range of Lenders and may be able to fulfil that dream a little faster than you initially thought.

So what can I do to improve my affordability or borrowing power?

Firstly you may not need to do anything to improve your affordability to get the loan you want so talk to us first.

But, after going through everything, if it is looking tight and your application needs some work, here are some of the things we may recommend you consider;

Cancel any unused credit including afterpay. Many people don’t recognise afterpay as credit, but the Bank certainly views it as a liability and as an indication you’re not living within your means.

Repay and cancel existing debt - personal loans, credit cards, H.P.s etc particularly if they are relatively small and can be repaid within three months.

Sell assets. If you have two cars for example but only need one.

Speak with an insurance specialist to review your insurances. Often you can find the same cover for cheaper or you may be able to increase your excess if appropriate.

Review other fixed expenses like your phone contract.

Consider getting a boarder if it’s appropriate to your circumstances. This doesn’t work for everyone but can be a great option for some people.

If you are renting now and could get in another flatmate to help with the bills - do it and save the reduction in costs that makes.

If you are really close to a 20% deposit we may suggest you save up or see if family can gift you the difference to get you to the 20%. This is because banks will often allow a tighter budget for someone with a 20% or more deposit.

Could you do something unconventional to save really hard for a while. I’ve seen people move in with family or live in caravans for a six month stint to make some really spectacular short term savings. If you have the goal and you know exactly how much you need and how long it will take you to get there, sometimes it is worth a bit of short term pain.