Why Understanding Borrowing Power Is Key to Getting a Home Loan
Borrowing power is the amount of money a lender is willing to loan you based on your financial situation. It’s a critical factor when buying a home, refinancing, or investing in property. Lenders calculate your borrowing power by assessing your income, expenses, existing debts, credit history, and living situation.
Simply put, your borrowing power answers the big question: “How much can I really afford to borrow?”
Understanding your borrowing power early helps you:
- Set a realistic budget
- Target the right properties
- Strengthen your loan application
How Lenders Calculate Your Borrowing Capacity
- Lenders don’t just look at your income—they take a full snapshot of your financial health, including:
- Income: Salary, bonuses, rental income, or other earnings
- Living Expenses: Groceries, utilities, subscriptions, and personal spending
- Debt Obligations: Credit cards, car loans, student loans
- Credit History: Your record of managing previous debts
- Other Commitments: Children’s school fees, insurance, lifestyle costs
They also apply a “buffer” by assessing your ability to repay the loan at a higher interest rate than today’s rates, to protect you (and them) from future interest rate rises.
Why Your Borrowing Power Matters
- Knowing your borrowing capacity gives you a clear advantage:
- Confidence when house hunting: You can filter properties within your range.
- Faster approvals: You’re more likely to get loan pre-approval.
- Smarter financial decisions: You avoid overstretching your budget.
- Understanding your limits ensures you don’t just “get a loan”—you get a loan that fits your lifestyle today and tomorrow.
How to Boost Your Borrowing Power
- Small changes can make a big difference to how much you can borrow:
- Pay down high-interest debt: Clear credit cards and personal loans.
- Tighten your spending: Reduce unnecessary subscriptions or expenses.
- Show consistent savings: Lenders love seeing financial discipline.
- Increase your income: Even small side income streams can help.
- Improve your credit score: Pay bills on time and minimise credit applications.
Check Your Borrowing Power Today
At Flenley Financial Group, we believe in making finance clear, simple, and empowering.
Our free Borrowing Power Calculator helps you get a real estimate based on your situation—without the jargon or pressure.
Try the Flenley Borrowing Power Calculator now: https://flenleyfg.com/calculator/borrowing-capacity/