1. What Is The Borrowing Capacity Calculation?

The Borrowing Capacity Calculation estimates how much money you can borrow for a home loan based on your income, expenses, and a lending factor. This helps determine your maximum loan amount while maintaining financial stability.

2. How Does The Calculator Work?

The calculator uses the borrowing capacity formula:

Where:

• \( Income \) — Your total monthly or annual income ($)
• \( Expenses \) — Your total monthly or annual expenses ($)
• \( Factor \) — Lending multiplier (dimensionless)

Explanation: This formula calculates your disposable income (income minus expenses) and applies a lending factor to determine your maximum borrowing capacity.

3. Importance Of Borrowing Capacity Calculation

Details: Knowing your borrowing capacity is essential for home loan applications, financial planning, and ensuring you don't overextend yourself financially when purchasing property.

4. Using The Calculator

Tips: Enter your income and expenses in dollars, and the lending factor provided by your financial institution. Ensure all values are positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What is a typical lending factor?
A: Lending factors typically range from 4 to 6, but vary by lender and individual circumstances.

Q2: Should I use monthly or annual figures?
A: Be consistent - use either all monthly or all annual figures for accurate results.

Q3: What expenses should I include?
A: Include all regular expenses: living costs, existing loan repayments, credit card payments, and other financial commitments.

Q4: Does this calculation include interest rates?
A: The lending factor typically incorporates current interest rates and lending criteria.

Q5: Is this calculation accurate for all lenders?
A: Different lenders use slightly different formulas and factors, so consult with your specific lender for precise calculations.