Know your borrowing capacity

An important step in refinancing is determining how much you can afford to borrow – this is referred to as your ‘borrowing capacity’.

When you apply for a new loan, the lender will want to know about your income, your financial commitments – including your existing home loan, and how well you have managed these commitments in the past. These will all determine how much you can afford to borrow.

Your income

Your income is a key factor lenders will look at when deciding the amount you can afford to borrow – even when you’re refinancing. Your income should comfortably cover your regular living costs as well as the repayments on your loan.

Your financial commitments

As well as your income, lenders will look at your current financial commitments to calculate what you can afford to pay. They’ll take into account things like credit cards and personal loans.

Don’t over-stretch yourself. You still need to be able to enjoy life plus have funds to meet unexpected expenses along the way.

Use Aussie’s Borrowing Calculator to see how much you may be able to borrow.

Play it safe

When deciding how much you can borrow, most lenders like to see that you would still be able to keep up the loan repayments even if interest rates were to rise. It’s worth taking the same approach to be sure you could comfortably repay the loan if rates move higher at some point in the future.

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