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Ben Kingsley Blog post by Ben Kingsley

How much Money can you borrow?

So how much money can I borrow? It’s a question we all ask ourselves from time to time and it’s a good question to ask and from a Lender’s point of view it’s a question around serviceability. So when they’re talking about serviceability they’re actually saying that here’s the household income coming in, here’s the expenditure that we’ve got associated with running our household, and then finally what’s the surplus cash that’s left over.

It’s that surplus cash that’s going to correlate to the repayment that we might need to make to service that debt. So if you are a first home buyer, one of the things that you need to take out is obviously your rental expense. So if you’re paying rent, take that out to do your calculations. Now if you’re also looking to buy for investment purposes, make sure you add in the expected rental income. That’s the net rental income you going to get but also factor in the expenditures and the cost of holding that particular investment property as well. And then you wash out the actual surplus at the end and do you have enough money to cover that. Now that’s all you need to understand.

A great rule of thumb for you however and this is a great little tip every twenty five thousand dollars that you have coming in the household income roughly co-relates to about a hundred thousand dollars in borrowing power. So you can do some rough numbers. Now, if you look at the internet this plenty of calculators out there that will show you roughly what you can borrow.

But bear in mind some of you might be a little bit shocked in terms of how much the banks are willing to lend you. And don’t overestimate that figure they’re obviously trying to engage you in a conversation but the reality might be that you can’t borrow as much as what they are showing on there and the reasons for that might be simple. You might have two kids or three kids but the assessment calculators are only factoring in that you don’t have any children at all. So there are the type of things that you need to understand and that’s how you work at how much you can borrow.

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