How much can I borrow for my home loan?
Disclaimer: The below guide is general in nature and do seek individual financial advice to see how this applies to your situation. Our experienced advisers are on hand to help at no cost to you (T’s and C’s apply)
Often the first question clients ask is ‘How much can I borrow?’
This is a simple question that often has a much more complex answer. Sometimes it can be mistaken for the adviser being evasive, but this is usually not the case.
Borrowing power is just one factor, other factors like deposit amount, credit history, and account conduct can also be influencing factors on our lending.
A very rough, but helpful rule of thumb
I repeat, this is only to be taken as a general idea and not the final outcome. As noted below, there are many more variables that go into this equation.
As advisers, we know that we can get roughly 4-6x someone’s income in lending. So someone on $100,000 before tax, can likely borrow $400,000 - 600,000. Then add in your deposit to get the final purchase price.
So if someone has a $150,000 deposit and $100,000 income, we may be able to get $400,000 - $600,000 in lending + $150,000 deposit gives us a purchase price of roughly $550,000 - $750,000.
This is obviously quite a wide range. Different lenders, different types of loan, and different financial situations will mean that the final figure will take a little bit of work to find out. Usually a 15 minute call with one of our brokers will get us much closer to this final figure, or complete our quiz and we will get back to you.
What factors can increase your borrowing power?
!!! Do consult with your adviser before acting on these !!! as this is a very simplified description of how it affects borrowing.
Increased income, this can be more hours, hourly rate increase, or a salary increase
Paying off debts
Reducing fixed expenses like Kiwisaver contributions or childcare.
Taking on a boarder for extra income.
What factors can reduce borrowing power?
!!! Do consult with your adviser before acting on these !!! as this is a very simplified description of how it affects borrowing.
Number of children - banks often deem that more children means more regular expenditure
Outgoing Child Support payments
Increasing insurance and council rates
Tithing to a church or similar
Less than 20% deposit can sometimes mean lower borrowing power, but not always if using schemes like Kainga Ora First Home Loan
How can I get a more accurate idea of what I could borrow?
Complete our quiz and one of our qualified financial advisers will aim to come back to you within 1 working day with an assessment of where your lending might sit. We can also help to optimise your financial situation in both a general and lending perspective.
It’s best to have this conversation as early as possible to make sure that the path to home ownership and lending is clear and acheivable.
