20 Oct 2021
Does Salary Sacrifice Affect Borrowing Capacity?
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Your borrowing capacity is the maximum amount lenders will loan to you. While there is a standard formula lenders follow, lenders may assess your income or expenses differently. Essentially, your borrowing capacity is determined by figuring out the difference between your net income (what you get paid after taxes) minus your total monthly expenses. There are a number of factors that can affect your borrowing capacity.
When calculating your borrowing capacity, lenders look at a number of factors. These factors include the following:
Most lenders will add an interest rate buffer to your estimated interest rate when calculating your borrowing power. This is to ensure you can still afford your repayments in times of financial hardship. Some lenders may calculate your borrowing power based on your credit limit instead of using the amount you owe. In addition, lenders may decrease your borrowing capacity depending on the location of your property and how risky they consider it to be.Â
At Mortgage House, we understand how complicated the home loan application process can be, which is why we work with you every step of the way. We can also help you improve your borrowing power, helping you get the most out of your income so you can purchase the home of your dreams.Â