How much can I afford to borrow?
Knowing how much to borrow on your home loan will depend on what you can afford in mortgage repayments on your existing income, and how much a lender is willing to offer on your property.
Assess your current income and expenses, including credit card payments and typical living costs. The amount left over will determine the level of mortgage repayments you can afford.
Ideally, your total fixed payments shouldn’t take up more than 40 per cent of your gross income, including mortgage repayments.
The more you have saved as a deposit, the less you will need to borrow on your home loan.
You should aim to save at least 20 per cent of the total home value to avoid the prospect of paying lenders mortgage insurance, which protects the lender if the borrower can no longer make their repayments.
From your lender, you can expect to borrow up to 80 per cent of the value of your property. If you want to borrow more than this on your home loan, you may face a low-equity premium cost or mortgage indemnity insurance.
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These expenses usually consist of a lump sum that you can pay up front or add into the loan amount. The payment covers lenders in the event that a borrower is unable to keep up with their payments.
If you’re unsure about how much to borrow, the team at Loanseeker can explain everything you need to know and work with you to assess the level of repayments you can afford.