Find out how much you can afford with our home or investment loan borrowing power calculator

Have you ever wondered: Can I afford an investment property?

Or maybe you’ve wondered if you can afford to buy your first  home or upgrade your current home.

Well…our Loan Borrowing Power calculator will help you find out how much you can borrow and what your repayments might be.

You’ll get a quick estimate on how much you may be able to borrow based on your current income and existing financial commitments.

Whilst it is always best to speak to a professional, like the team at Metropole, this calculator is a great tool to help you work out what you can afford to buy.





Before you start hunting for your investment property and the perfect home its best to get an indication of what you can borrow to make the dream a reality.

But let’s first look at everything you need to know about our home loan affordability calculator, including how it works and how it can help you determine your borrowing power.

How does a home loan borrowing calculator work?

A home loan borrowing calculator takes several important factors into account to determine your borrowing capacity or which size loan you may be eligible for.

The calculator takes into account your annual income (net salary before tax) and any other income which is then compared against your outgoing monthly expenses, number of dependents, any debt (such as credit cards or other loans) and other financial commitments.

You can then adjust the interest rate and loan term on the calculator to see how it would affect your borrowing capacity which would help to determine what type and size of loan would suit your budget and income.

How do banks calculate mortgage affordability?

Each lender calculates mortgage affordability in a different way, which means there is no ‘hard and fast’ rule to work out exactly how much you will be able to borrow until you go to apply for pre-approval with your preferred lender or preferably through an investment savvy finance broker.

But generally, there are five key steps banks will take to assess how much you can afford to borrow.

1. Work out how much you earn

You and your partner’s annual income provides the baseline for calculating your mortgage affordability.

There are several income sources that banks will consider when calculating your overall income:

  • Base income
  • Overtime income: Some banks will accept all of your overtime income if it is proven to be regular and ongoing. Other banks will only accept around 50% of overtime income for assessment purposes.
  • Bonuses: For a lender to include your bonus income payment, you’ll have to show a two-year history to show regularity.
  • Commission payments: Some lenders will consider commissions in your gross income if it can be proven as regular and ongoing
  • Any tax-free income
  • Rental income from investment properties: Lenders typically use 80% of the rent income that you receive to allow the remaining 20% for costs such as property management, repairs and council rates.

2. Find out about your situation

Borrowing jointly with your partner can significantly boost your borrowing power versus if you were a single person.

Banks also ask information about any dependents you have because dependents cost money. The more dependents you have the less a bank may be willing to lend and therefore the lower your borrowing power.

3. Calculate total expenses

Banks consider a number of factors when determining how your expenses or existing commitments may affect your borrowing power.

  • Living expenses: Grocery and petrol costs to daycare fees. Banks want to see an overview of all your outgoings to see how much ‘spare’ money is left after paying living expenses.
  • Existing Mortgages
  • Credit Cards: Most lenders will assess your credit cards as being fully drawn, whether they are or not.
  • Personal Loans

4. Add the surplus

Some lenders also include a non-existent expense called a ‘buffer’ to ensure your borrowing power is conservative to cover any unforeseen circumstances.

5. Calculate how much you can borrow

Banks will generally then use the above information to work out how much money is remaining in your budget and available to go towards your monthly mortgage repayment.

The lender will then calculate your home loan repayment for a 30-year loan and include applicable interest rates.

How much do you need to earn to get a mortgage?

Do you think your income is too low to get a home loan?

That’s a myth.

Spend Less Than You EarnHome loan lenders don’t reject people with earnings below a certain threshold, but it will mean your lending capacity is less.

Due to the way banks calculate mortgage affordability, as discussed above, the amount of mortgage you may be eligible for is calculated at a percentage of your income.

Sure, if you have a low income (The Australian Taxation Office classes a taxable income of under $37,000 as a low income and eligible for the full $700 income tax offset as outlined in this year’s Federal Budget, so that could be a good guide of what is considered ‘low’), your income could present issues with buying a home in today’s property market, but it’s not impossible.

In fact, some lenders have specific products available which are tailored specifically for low-income earners of single-income households.

How accurate are mortgage affordability calculators?

One of the most important things you need to do when looking to buy a property is determining what you can afford to borrow.

In reality, a home loan affordability calculator is as accurate as the information you input into it so while it does go some way to estimating your borrowing power, it should be used only as a starting point to determine whether home ownership is financially within your reach before applying for pre-approval and pursuing listings.

Whilst it is always best to speak to a professional, like the team at Metropole, this calculator is a great starting point of anyone looking to take on a new loan.

Now is the time to take action and set yourself for the opportunities that will present themselves as the market moves on

Metropole

If you’re wondering how to take advantage of the new property cycle you can trust the team at Metropole to provide you with direction, guidance and results.

Whether you are a beginner or a seasoned property investor, we would love to help you formulate an investment strategy or do a review of your existing portfolio, and help you take your property investment to the next level.

In “interesting” times like we are currently experiencing you need an advisor who takes a holistic approach to your wealth creation and that’s what you exactly what you get from the multi award winning team at Metropole.

If you’re looking at buying your next home or investment property here’s 4 ways we can help you:

  1. Strategic property advice. – Allow us to build a Strategic Property Plan for you and your family.  Planning is bringing the future into the present so you can do something about it now!  This will give you direction, results and more certainty. Click here to learn more
  2. Buyer’s agency – As Australia’s most trusted buyers’ agents we’ve been involved in over $3.5 Billion worth of transactions creating wealth for our clients and we can do the same for you. Our on the ground teams in Melbourne, Sydney and Brisbane bring you years of experience and perspective – that’s something money just can’t buy. We’ll help you find your next home or an investment grade property.  Click here to learn how we can help you.
  3. Wealth Advisory – We can provide you with strategic tailored financial planning and wealth advice. Click here to learn more about we can help you.
  4. Property Management – Our stress free property management services help you maximise your property returns. Click here to find out why our clients enjoy a vacancy rate considerably below the market average, our tenants stay an average of 3 years and our properties lease 10 days faster than the market average.
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About

Michael is a director of Metropole Property Strategists who help their clients grow, protect and pass on their wealth through independent, unbiased property advice and advocacy. He's once again been voted Australia's leading property investment adviser and one of Australia's 50 most influential Thought Leaders. His opinions are regularly featured in the media. Visit Metropole.com.au


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