Borrowing Power Calculator | ANZ (2024)

FAQs

How do I calculate my borrowing power? ›

Generally speaking, your borrowing power is calculated as your net income minus your expenses. Your expenses can be impacted by things like the number of dependents in your family, any current home or personal loan repayments and other financial commitments such as private health insurance.

Using a percentage of your income can help determine how much house you can afford. For example, the 28/36 rule may help you decide how much to spend on a home. The rule states that your mortgage should be no more than 28 percent of your total monthly gross income and no more than 36 percent of your total debt.

The amount you could borrow is based on your income increased by a multiplier. Lenders traditionally offer an amount between four and five times your income, though in some cases they may offer more or less than this. If you are borrowing with a partner there are a few ways a lender might combine your incomes.

Your income will determine the loan amount you are eligible for. Lenders will consider your take-home salary, minus certain common deductions such as gratuity, PF, ESI, etc. The take-home salary will determine the EMI amount you can afford and thus the total loan amount you can borrow.

The formula to calculate the borrowing base is the sum of the collateral pledged by the borrower once adjusted downward by the advance rate. Borrowing Base = (Accounts Receivable × Advance Rate) + (Inventory × Advance Rate) For instance, the advance rate could be 80% for accounts receivable, and 60% for inventory.

The formula is: M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1], where M is the monthly payment, P is the loan amount, i is the interest rate (divided by 12) and n is the number of monthly payments.

On a salary of $36,000 per year, you can afford a house priced around $100,000-$110,000 with a monthly payment of just over $1,000. This assumes you have no other debts you're paying off, but also that you haven't been able to save much for a down payment.

It's recommended you have a credit score of 620 or higher when you apply for a conventional loan. If your score is below 620, lenders either won't be able to approve your loan or may be required to offer you a higher interest rate, which can result in higher monthly mortgage payments.

The home price you can afford depends on your specific financial situation—your down payment, existing debts, and mortgage rate all play a role. Most experts recommend spending 25% to 36% of your gross monthly income on housing. For a $70,000 salary, that's a mortgage payment between roughly $1,450 and $2,100.

Most financial advisors agree that people should spend no more than 28 percent of their gross monthly income on housing expenses, and no more than 36 percent on total debt. The 28/36 percent rule is a tried-and-true home affordability rule of thumb that establishes a baseline for what you can afford to pay every month.

How do you calculate borrowing cost? ›

Mortgage lenders decide how much you can borrow, for the most part. But that does not mean you have to take only what they give. What you can borrow is usually determined by your percentage of gross monthly income, debt to income ratio, your credit score, and the amount of money you are willing to put down.

FORMULA. The amount of interest, I I , to be paid for one period of a loan with remaining principal P P is I = P × r n I = P × r n , where r r is the interest rate in decimal form and n n is he number of payments in a year (most often n n = 12).

How much money should you borrow?:How much you should borrow depends on many factors, including your income, existing financial obligations, and the type of loan. Calculating your monthly payment before borrowing can help you see if a loan will work with your budget.

Maximum Loan Amount Formula

Starting with the loan to value (LTV) ratio, the maximum loan amount is the maximum LTV ratio multiplied by the property value. The debt service coverage ratio (DSCR) is distinct because the lender's constraint is set based on a minimum DSCR ratio.

Most lenders require that you'll spend less than 28% of your pretax income on housing and 36% on total debt payments. If you spend 25% of your income on housing and 40% on total debt payments, they'll consider the higher number and qualify you for a smaller amount as a result.

Determining equity is simple. Take your home's value, and then subtract all amounts that are owed on that property. The difference is the amount of equity you have.