How much can I borrow?
Taking on a mortgage is likely to be the biggest loan you ever consider. Owning your own home is a major achievement for most people and you will want to feel that home is secure and the mortgage is not too demanding for you.
How much to borrow on your Perth home loan depends on what you can afford and the type of property you want. A mortgage of $350,000 will get you very different properties around Western Australia.
You may need to compromise somewhere in the middle. For example, you may get a 5-bedroom house in Joondalup, but only a 2-bedroom unit in Fremantle for the same price.
Each different lender will have slightly different lending criteria, and you may find the approved loan amount varies
considerably from one lender to another. However, the main factors needed to approve a home loan remain the same across all types of lenders.
Your borrowing capacity will depend on a number of factors:
- Your income and expenses
- Your deposit
- Estimated repayments
- Assets and liabilities
Think carefully about your lifestyle, your spending habits, any other financial responsibilities you have such as a car loan or credit cards. Allow room in your budget for any upcoming expenses that may come up (holidays, school fees, car repairs etc).
Planning out your budget carefully will help protect you from unexpected bills that conflict with your mortgage repayments.
When considering your application, lenders will look at your ability to repay the loan over an extended period of time, and not just while rates are low. The upper limit for repayments should never exceed 35 per cent of your weekly pre-tax income (or 30% of your combined income for joint borrowers).
Lenders will also look at any assets you may have. They are looking to see that you own more than you are borrowing, so your car, savings, investments and furniture can all be used to build up your credit rating. Factors like your occupation, where you live and your credit history will all influence how much you can borrow.
Some lenders will lend you 100% of the purchase price of a property, but if you do borrow more than 80% of the purchase price of a property, your loan will be subject to Lenders Mortgage Insurance (LMI). This is a one off fee that you pay to protect the lender in the event that you default on the loan and the property is sold but makes a loss.
Finally, when looking for a home, consider your lifestyle. You may have to sacrifice many things in order to afford your own home. Affording dinners out, overseas holidays, petrol, travel costs and new clothes can become a lot harder once you have a mortgage to repay. Think about what you are prepared to sacrifice. It feels great to own your own home but not at the expense of your happiness!
If you would like a more precise figure on how much you can borrow, call you Mortgage Broker Perth on 1300 787 665.
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