Your borrowing capacity is one of the biggest factors in what you can buy. Yet many people are surprised by the number a lender comes back with. Understanding what lenders assess puts you in a stronger position before you apply.
Your income
Lenders look at how much you earn and how stable that income is. Salaried income is usually the simplest to assess. If you are self-employed, work casually or earn commissions or bonuses, expect lenders to ask for more documentation and a longer history. For investment purchases, lenders will generally also consider the expected rental income from the property.
Your living expenses
Lenders want to see that you can comfortably meet repayments on top of your everyday costs. They will review your spending, and bank statements often tell the story. Regular subscriptions, discretionary spending and other commitments all count.
Your existing debts
Car loans, personal loans, other mortgages and buy now pay later accounts all reduce how much you can borrow. Credit cards count too, and lenders typically assess them on the limit, not the balance you owe. Closing cards you do not use or reducing limits can make a real difference.
Your credit history
Your credit report shows how you have managed credit in the past. Missed payments, defaults or many recent applications can affect how lenders view you. It is worth checking your report before applying so there are no surprises.
Your deposit and savings
The size of your deposit affects the loan amount and how the loan is structured. Lenders also like to see a consistent pattern of saving, as it shows you can manage money over time.
Your dependants and circumstances
The number of people who rely on your income affects how lenders calculate your living costs. Other circumstances, such as upcoming changes to your work, may also be relevant.
Not every lender assesses you the same way
This is the part many people miss. Lenders have different policies, and the same application can produce quite different outcomes depending on where it goes. That is why getting the right property finance guidance before you apply matters, especially if you plan to build a portfolio over time.
Know your number before you look
Understanding your borrowing capacity early helps you search with confidence and act quickly when the right property comes along.
Want to know where you stand? Call the Mirren team on 02 8814 5275 or book a free strategy session and we will help you understand your borrowing position and what it means for your plans.
This article is general information only and does not take into account your personal objectives, situation or needs. Please seek professional advice before making any investment or finance decisions.
