How much can I borrow?
It’s rather appealing. The idea of punching a few numbers into an online mortgage calculator and getting an instant answer about whether or not you’re good to go on the mortgage front.
Our slick market research (5 minutes of Googling) told us that people are searching hard out online in the hopes of getting an answer to that all important question ‘how much can I borrow?’ We know this to be true too – it’s one of the top three questions people throw at us when they phone.
We spent a whole bunch more minutes Googling for a tool that might help answer the question, and you know what? We came up more or less empty handed.
Now don’t get me wrong… the existing calculators are handy little tools. But 99% of them don’t answer the key question of how much you can borrow. The problem is, most are too simplistic to create an accurate picture of your situation.
Here’s what we found:
- Plenty of online mortgage calculators tell you what your repayments would be for a home loan of $XXX,XXX, at an X% interest rate, repaid over X years. That’s useful info once you’ve got the home loan but doesn’t tell you what you can borrow in the first place.
- Other home loan calculators transform your current rent payments into home loan repayments. The intention is to indicate how much mortgage money your current rent could buy. Add your deposit to get purchase price and then go out house hunting, right? Um, not quite. The size of your deposit (in percentage terms) is a significant determinant in the affordability equation, and what you pay in rent isn’t always a good indicator of what you can borrow. In most instances the two aren’t even remotely related.
Having pretty much Googled ourselves out with no success, we decided to develop our own Hastie Mortgages calculator that answers the golden question ‘how much can I borrow?’
It’s based on affordability factors that the banks use, so it gives a meaningful result – especially for first home buyers (many of whom come to us with less than 20% deposit).
To make it super easy to see where you’re at, we’ve adopted a traffic light system so you can see if you’ve got a great chance of being approved at a given home loan amount (green), if you’re farting against thunder (red) or if you’re somewhere in between (orange). It tells you what the loan repayments will be as well. And, if that just happens to match what you’re paying in rent then that’s lovely.
The truth is that it’s a simplified version of the real thing that the banks give mortgage advisers to use when assessing home loan applications.
Test it out and get the straight answer you’ve been Googling for. But remember, there’s a whole lot more to the picture than a few calculations – and a good adviser will add up all the other pieces (savings record, bank account conduct, credit history etc) to
give you the most accurate picture of what you can really truly honestly genuinely actually borrow.