Understanding Your Borrowing Power on a $200,000 Salary in Australia

Factors Influencing Borrowing Power

Income and Expenses

While a $200,000 salary certainly positions you well in the eyes of lenders, your net income after tax and regular expenses will ultimately determine your borrowing capacity. Lenders typically consider your disposable income to assess how much you can afford to repay monthly.

Credit Score and History

Your credit score is a key factor in determining borrowing power. A higher score can open doors to better interest rates and borrowing terms. It's crucial to maintain a good credit history by paying bills on time and managing debts effectively.

Existing Debts

Any existing loans or credit card debts will be factored into your borrowing power. Lenders calculate your debt-to-income ratio to ensure you can manage additional repayments without financial strain.

Interest Rates and Loan Terms

Prevailing interest rates and the terms of the loan you choose will affect the total amount you can borrow. Opting for a longer loan term might increase your borrowing capacity, but it will also mean paying more interest over time.

Practical Tips to Increase Borrowing Power

Reduce Unnecessary Expenses

Review your monthly spending and cut down on non-essential expenses. This will increase your disposable income, thus enhancing your borrowing capacity.

Pay Down Existing Debt

Reducing or eliminating existing debts can significantly improve your debt-to-income ratio, thereby increasing your potential mortgage amount.

Improve Your Credit Score

Ensure your credit report is accurate and work on improving your score by managing debts responsibly and clearing any discrepancies.

Consider a Joint Application

If possible, apply for a mortgage with a partner. Combined incomes can increase your borrowing power, although both parties' credit scores and debts will be considered.

Common Mistakes to Avoid

Overestimating Income

Remember that lenders assess your net income, not gross. Overestimating your income can lead to unrealistic expectations of your borrowing power.

Ignoring Debt Obligations

Failing to account for existing debts can lead to being over-leveraged. Ensure all debts are accurately listed when calculating your borrowing capacity.

Not Shopping Around

Different lenders offer varying terms and conditions. Comparing offers can help you find the best deal, potentially increasing your borrowing capacity.

How Esteb and Co Can Help

At Esteb and Co, we specialise in tailoring mortgage solutions to fit your unique financial situation. Our experienced brokers can guide you through the process, ensuring you maximise your borrowing power while finding a loan that suits your needs. We provide personalised advice, considering all factors from income to credit history, to help you make informed decisions.