How Much Do You Need to Earn to Borrow $700k?
A potential homeowner interested in borrowing $700k in Australia will need to make a yearly salary of around $250,000 to comfortably afford to pay for monthly mortgage repayments. Lending specialists and mortgage brokers recommend borrowers spend no more than 30% of their monthly income on housing expenses. A home loan applicant’s potential of approval for their desired number of borrowed funds largely depends on their borrowing power.
Borrowing power is relied on by brokers and lenders to determine the number of funds an applicant is approved to borrow, their ability to adequately make monthly mortgage repayments, and their overall risk factor as a borrower. A low-risk borrower will have a high credit score and good financial history while a high-risk borrower will have a low credit score and poor financial history.
Lenders calculate applicants’ borrowing power using their yearly salary, monthly expenses, loan amount, deposit size, and annual interest rate. If an applicant receives a low borrowing power calculation, there are various methods they can try out to increase their borrowing power, including the following examples:
- Improving their credit score and financial history
- Adding a guarantor to their home loan
- Making consistent debt repayments
- Closing unnecessary credit cards
- Decreasing high credit card limits
If you are interested in learning more about borrowing power or are ready to apply for a home loan, reach out to the Mortgage House lending specialists for additional information and specialised loan application assistance.