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Dear %%First Name%%

How much can I borrow?

Today's topic is probably one of the first things many people think of when considering buying their first home and understandably so. Without knowing how much you can borrow it is difficult to know where you can afford to buy and therefore difficult to plan ahead.

There are several key factors which will impact on the amount any bank or lender will feel comfortable in lending to you.


Your income

Some of the variables a bank will look at include, first and foremost, your income and security of your employment. For example, some of the questions they will ask you will include what your weekly wage is and how long you have been in your current job.

Your expenses

Next a lender will look at your outgoings or expenses. They will want to know about any loans you may have or any credit card or store cards. And here is a tip... when looking at credit and store cards, it is not the balance you owe that will impact on your borrowing capacity, but the actual limit you have available. This is logical when you think about it because at any point in the future after they lend you the money to buy your home, you could then max out your credit cards and this could affect your capacity to make your new loan repayments to them!

Other factors

Some of the other factors affecting your borrowing power are your credit history or CRA report (have you ever defaulted on a loan or mobile phone account for instance), the number and age of the children or dependants you have, the type or size of the property you are looking at buying and your deposit saved.

This may seem like a lot to take in, but effectively what the lender is looking at is aimed at estimating what they call your uncommitted monthly income or UMI... the greater the UMI the larger the borrowing capacity... so the higher your income and lower your debts the more you can borrow.

To work out your UMI each lender has their own servicing calculator. As mortgage brokers, we are trained on each lenders criteria and can match your needs with the lenders accordingly. We are also able to provide you with a good idea of how much you can borrow and can discuss the factors affecting this constructively and effectively.

Set your borrowing limits

Knowing how much you can borrow is important, but of even greater importance is ensuring you can afford the repayments. Be careful not to overextend yourself because you think you have found your ideal dream home. That is a sure way to turn your dream into a nightmare!

Hopefully this has been a useful insight into funding your first home. Our next installment in this first home buyers "getting started" email course will look at the costs involved in the purchase. As always if you have any questions please let us know.

Until next time...


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