How Do I Calculate My Borrowing Capacity When Refinancing?

If you already have a home loan and you’d like to access extra funds, then refinancing is an option well worth exploring. The first thing you’ll probably want to know right away is either who to borrow from or how do you calculate borrowing power?

We can help you find the right lender as well as all the loan borrowing capacity questions you have when you meet with us, either in person or online. Knowing your borrowing power estimate is crucial for planning how much equity you can access when you are planning to refinance. 

So how do you calculate your borrowing power when refinancing? Read on to learn more.

Why refinance in the first place?

There are many reasons people refinance their home loan including:

• To reduce monthly loan repayments by securing a lower interest rate
• To access funds for home renovations or property investment
• To access money for holidays, consolidate debt or buy a car

What is borrowing capacity?

Borrowing capacity is the maximum amount of money you can borrow from a loan provider. The exact amount will depend on the lender’s criteria and your individual circumstances, including how much equity you have in your property. Most lenders use the same basic formula when calculating your borrowing power estimate.

Equity is the difference between your property’s market value and the amount of money you still have left to pay on your home loan.

Another important metric is your loan-to-value ratio (LVR). This is the percentage of the property value that you still owe to your lender. As you pay down your mortgage, your LVR should decrease. The lower your LVR, the better – it signals to lenders that you are a less risky borrower.

How do I calculate my borrowing capacity?

One of the best ways to calculate your borrowing power is to ask an expert – in this case, a professional mortgage broker in your local area like us.

Of course, you can also go through a bank or a non-bank lender, but they will use their own calculators and steer you towards their own refinancing products. Banks are not legally bound to work in your best interests so you are best to seek independent advice.

A mortgage broker is a better option because you’ll get unbiased and personalised advice. Your refinance mortgage broker will look at your current home mortgage and other debts you may have, along with your income, your household situation and your property’s value to give you an accurate calculation of your borrowing capacity.

If you want to know your general loan monthly repayments right now, you can use our borrowing power calculator.

Borrowing power calculator: use our easy our online repayments calculator

You can also use our borrowing power calculator to find out your maximum loan borrowing power to get an understanding of your limits on refinancing. If you’re ready to talk loan repayments, what you need to do to refinance as well as any questions you have with changing your rate term, what will happen to existing loan repayments and what does loan settlement look like when refinancing, chat to our loan specialists today.

Why use a mortgage broker to calculate your borrowing capacity?

As well as providing you with a calculation of your borrowing capacity, there are other good reasons to use a mortgage broker when refinancing your home loan.

• Access the best deals – Your mortgage broker will research all your options and present you with the best refinance products that suit your specific needs.
• Less paperwork – Your mortgage broker will handle the bulk of the paperwork, making the process less stressful and less time-consuming for you.
• Better chance of approval – Because mortgage brokers know the loan industry inside and out, they can resolve any potential loan application issues early on.

Discover more about refinancing your home loan here.

Speak to a home loan specialist today

With an experienced refinance mortgage broker by your side, you’ll know exactly what your borrowing capacity is and why as well as what your new loan monthly repayments will be. The team at North Brisbane Home Loans is ready to help you with all aspects of your home loan refinancing. To learn more, get in touch with us today.