Get the Right Home Loan in Perth: Expert Advice for Busy Families
Borrowing Power Calculator
Defining the Term: What is a Borrowing Power Calculator?
“This calculator is designed to give you an estimate of how much money you can borrow from a lender. Note that the borrowing power is calculated on a custom model which can differ from lender to lender. The purpose of this calculator is to merely give an indication of what a lender could offer you, based on some of your basic incomes and financial commitments. You’ll only know how much you can borrow for certain when you apply and receive conditional approval for a maximum borrowing amount on a loan.”
A borrowing power calculator is a useful tool that helps figure out how much money a lender might be willing to give you for a home loan. It looks at your financial situation and gives you an idea of how much you can borrow. This is super helpful when you are looking for a home because it helps you focus on homes that're in your price range.
The calculator does not just look at the price of the home it looks at how you can manage to pay back the loan. This is called your serviceability, which's your ability to make regular payments on the loan without having trouble paying your bills.
To calculate this the tool looks at how much money you make and how much you spend. It includes your job and any other income you have like money from renting out a property or investments. Then it subtracts all the money you already owe, like car loans or credit card debt. The calculator also uses an interest rate than what is currently available to make sure you can still afford the loan if interest rates go up.
These calculators are really helpful. You need to remember that they are just an estimate. They do not guarantee that you will get a loan for that amount. Each lender has its rules and ways of looking at your application so you might get different results, from different lenders.
So, while a borrowing power calculator gives you an idea of how much you can borrow it is not the final decision. The lender will still need to check your credit history and verify all your information before they decide how much they are willing to lend you. A borrowing power calculator is a tool to help you get started and a borrowing power calculator is a good place to begin when you are looking for a home.
Assumptions:
It does not take into account any possible fees i.e. up-front fees or ongoing fees.
Interest rate does not change over the loan term.
Interest is calculated by compounding on the same repayment frequency selected, i.e. weekly, fortnightly, monthly. In practice, interest compounding frequency may not be the same as repayment frequency.
It is assumed that a year consists 26 fortnights or 52 weeks which is counted as 364 days rather than 365 or 366 days.
No rounding is done throughout calculation whereas repayments are rounded to at least the nearer cent in practice.
Buffer or Extra Interest Rate: In order to avoid the risk of interest increasing, many lenders apply a buffer / extra interest rate to calculate borrowing power but the repayments and total interests payable are still calculated without buffer rate.
The borrowing Power total is calculated at the greater of the Interest rate input + a buffer of 3% or a fixed floor rate of 5.75%
The greater of the estimated Living Expenses input, or a default Household Expenditure Measure amount which is implemented in many Lenders serviceability calculations, is used to calculate the Borrowing Power amount.
How to Use This Tool
To use Borrowing Power Calculator, type on the following fields: Enter your income details: Joint Income, select "Yes" or "No"; Dependent children, select 0, 1, 2 & 3+; Net salary (eg. $5,000) and select "Annually", "Monthly", "Fortnightly" & or "Weekly"; Net salary2 (optional) (eg. $5,000) and select "Annually", "Monthly", "Fortnightly" & or "Weekly"; Other net income (optional) (eg. $5,000) and select "Annually", "Monthly", "Fortnightly" & or "Weekly". Enter you expense details: Living expenses (eg. $5,000) and select "Annually", "Monthly", "Fortnightly" & or "Weekly"; Car loan repayment (eg. $5,000) and select "Annually", "Monthly", "Fortnightly" & or "Weekly"; Other payments (eg. $5,000) and select "Annually", "Monthly", "Fortnightly" & or "Weekly"; Total credit card limits (eg. $5,000). Enter your loan details: Interest Rate (eg. 5.5%); Loan Term (eg. 30 years)
Once all details are entered, you can View your results: You can borrow up to (eg. $297,000); Monthly Repayment (eg. $1,686.33); Fortnightly Repayment (eg. $778.31); and lastly Weekly Repayment (eg. $389.15)
Also can view a Graphic via Loan Balance Chart: shows Loan Balance, Total Payment via Amount Owing and the Years.
Lastly, with the results shown you can print your results via Print button and view rates under Assumption.
