Mortgage calculator: how much can you afford to borrow? | finder.com
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Mortgage affordability calculator

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Find out how much you can borrow before you apply for a mortgage.

Input details of your income, expenses, outstanding debt and the interest rate of the mortgage you’re interested in, and you can calculate exactly how much you would be able to borrow and what your monthly or biweekly repayments would be depending on the loan term you choose.

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Connect with vetted lenders quickly through this free online marketplace.

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What are the eligibility requirements for most mortgages?

Here are some criteria that most lenders look at when approving mortgage applications:

  • Down payment amount. The larger your down payment, the less risk a lender takes on by lending to you. As such, you can improve your eligibility for a home loan by saving for a larger down payment. This could attest to your ability to save regardless of the expenses you currently have.
  • Credit history. Your credit history provides information regarding how well you repay your debts. A good credit score may enable you to borrow a higher amount because it would demonstrate that you are a reliable borrower. Loan processors also check your credit history to see if you have applied for bankruptcy in the past or if you’ve had foreclosures.
  • Income. Your current income will also be a determinant of what you can borrow. A higher income might suggest that you are better able to make repayments on your home loan.
  • Financial stability. Lenders also consider your ability to pay the mortgage should you lose your source of income or should your income reduce. If you are self-employed or earn your primary income from investments, you may be seen as a higher risk to a lender.
  • Debts. Debts reduce your current income and savings, affecting your ability to repay your mortgage. Loan processors will usually calculate how much debt you have so that they can determine whether you will still have enough income to make monthly payments.
  • Age. Your age is also a factor that is used by lenders to determine your eligibility. Young people may have less debts and their income may increase in the future depending on their occupation, so they might be a better bet for banks.
  • Value of your home. You can use the equity on your current home loan to refinance your mortgage.

Why is it important to use a borrowing power calculator?

A borrowing power calculator gives you estimates of your borrowing limit depending on interest rates and your current income. Although the final decision of how much you can borrow lies with your lending bank, the calculator can be a great starting point to help you organize your finances in preparation for increasing the amount you are eligible for.

The calculator on finder.com makes the work of comparing mortgages from different lenders a lot easier. By inputting information such as your income, expenses and the amount you wish to borrow, you can easily calculate what you are eligible for and find a lender who can provide the financing you want at a rate and repayment plan that suits you. This calculator also enables you to calculate the loan term that would work the best for you.

A longer loan term cuts down on your monthly installments but increases the amount you have to pay in interest charges, while a shorter loan term means that you save on interest payments but have to commit to higher monthly payments. With the help of the borrowing power calculator, you can work out what loan term suits your income and current debt liabilities so that you can come up with a mortgage proposal that stands a good chance of being approved.

How to use the borrowing power calculator

Using the calculator is very simple. Here are the different fields you need to fill out:

  • Details of your income. This section requires you to enter accurate details of all sources of your income, including salaries, commissions and monthly bonuses. Your income is what ultimately determines what you can borrow as it’s where money for the monthly payments of your mortgage will come from. If you’re signing the mortgage with a partner or spouse, you’ll need to enter details of your joint or household income, which can increase the amount you can borrow.
  • Expense details. In order to calculate how much you can borrow, the calculator needs full details of your liabilities, debts and monthly expenses. If you have an outstanding car loan or personal loan, you need to include it in this field because it can affect your ability to pay the mortgage. Credit card debt is also entered in this section along with all of your total annual expenses. It’s important to repay most of your credit card debt before applying for a mortgage, as this debt could have a bearing on whether or not you get approved.
  • Loan details. Each loan you look at will have different features. The calculator works out the amount you can borrow from a certain loan by using its interest rate on mortgages and the loan term you choose. Enter the interest rate and use different variables on the “loan term” field to see how this affects the overall amount you are able to borrow. Most mortgage providers allow you to repay your home loan over 30 years so that you can reduce your monthly payments.

Bottom line

While it’s impossible to use a regular calculator to see if you’re eligible for a home loan, a specialized borrowing power calculator can help you get the most accurate result. If you also take into account the eligibility criteria offered by most banks, you could have a fairly good idea of whether or not you’ll be approved for the mortgage you want.

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