Buying your next home: What can you afford?
Planning to buy your next home? Learn how to confidently calculate what you can afford, covering equity, borrowing power, repayments and things to consider to guide your next move.
As you’re getting ready to buy your next home, it’s important to recognise that your financial situation may have evolved since your first home buying experience. Factors such as a:
- Larger family
- Increased income
- Other investments
… will help determine how much you can afford to spend on a new home.
You’re also likely to have built equity in your current home either due to:
- Additional mortgage repayments you’ve made or
- An increase in the value of your property
To determine your borrowing capacity for your next home, here are three factors to consider.
Income
This is the most important factor in determining how much you can borrow on your home loan. Use our calculators to provide an estimate of what your repayments will be once you start making mortgage repayments on your new loan.
If you’re applying with Unloan, here are the documents you’ll need to provide for us to verify your income.
Equity
You can use the value of your current home that you currently own, known as equity, to help with the purchase of your next home. This involves converting the equity into cash to be used as a direct deposit for your new home.
How much equity you have in your home loan affects how much you can borrow for your next home. It’s important to note that if you’re borrowing more than 80% of the new home’s value, lender’s mortgage insurance (LMI) or a Low Deposit Premium (LDP) may apply, depending on the circumstances of your loan. These are both one-off, non-refundable costs that are added to the loan amount.
Repayment history
Your history of mortgage repayments and other debts are also taken into consideration when you apply for a home loan. Consolidating and clearing off other debts can be beneficial, as it allows you to focus on making additional repayments on your mortgage, which may in turn increase the equity in your current home.
By understanding these factors, this can help you decide if buying your next home is feasible with your finances.
Unloan is a division of Commonwealth Bank of Australia.
Applications are subject to credit approval, satisfactory security and you must have a minimum 20% equity in the property. Minimum loan amount $10,000, maximum loan amount $10,000,000, and total borrowings per customer across all Unloan loans is $10,000,000. (For purchase loans a minimum 10% equity is required - however a Lenders Mortgage Insurance (LMI) premium and higher interest rate apply. In some cases, depending on the property’s location or type, an LMI premium may also be required for LVR between 70.01% to 80%). For loans with Lenders Mortgage Insurance (LMI) the minimum loan amount is $10,000, maximum loan amount is $3,000,000 and total borrowings per customer across all Unloan loans is limited to $3,000,000).
Unloan offers a 0.01% per annum loyalty discount on the Unloan Live-In rate or Unloan Invest rate upon settlement. On each anniversary of your loan’s settlement date (or the day prior to the anniversary of your loan’s settlement date if your loan settled on 29th February and it is a leap year) the margin discount will increase by a further 0.01% per annum up to a maximum discount of 0.30% per annum. Unloan may withdraw this discount at any time. The discount is applied for each loan you have with Unloan.
*At Unloan, we do not charge any annual, application, banking, account, transaction, late or exit fees. In certain circumstances you may be required to pay a Lenders Mortgage Insurance (LMI) premium. Learn more about why this is applied and how it works. Government fees may also apply. Learn more about government fees here. Your current lender may charge an exit fee when refinancing.
Tax law is complex and subject to change. For the latest information, check the ATO website or with your accountant or financial advisor.
Unloan is a division of Commonwealth Bank of Australia is also not a registered tax (financial) adviser under the Tax Agent Services Act 2009 and you should seek tax advice from a registered tax agent or a registered tax (financial) adviser if you intend to rely on this information to satisfy the liabilities or obligations or claim entitlements that arise, or could arise, under a taxation law.
Applications are subject to credit approval, satisfactory security and you must have a minimum 20% equity in the property. Minimum loan amount $10,000, maximum loan amount $10,000,000, and total borrowings per customer across all Unloan loans is $10,000,000. (For purchase loans a minimum 10% equity is required - however a Lenders Mortgage Insurance (LMI) premium and higher interest rate apply. In some cases, depending on the property’s location or type, an LMI premium may also be required for LVR between 70.01% to 80%). For loans with Lenders Mortgage Insurance (LMI) the minimum loan amount is $10,000, maximum loan amount is $3,000,000 and total borrowings per customer across all Unloan loans is limited to $3,000,000).
Unloan offers a 0.01% per annum loyalty discount on the Unloan Live-In rate or Unloan Invest rate upon settlement. On each anniversary of your loan’s settlement date (or the day prior to the anniversary of your loan’s settlement date if your loan settled on 29th February and it is a leap year) the margin discount will increase by a further 0.01% per annum up to a maximum discount of 0.30% per annum. Unloan may withdraw this discount at any time. The discount is applied for each loan you have with Unloan.
*At Unloan, we do not charge any annual, application, banking, account, transaction, late or exit fees. In certain circumstances you may be required to pay a Lenders Mortgage Insurance (LMI) premium. Learn more about why this is applied and how it works. Government fees may also apply. Learn more about government fees here. Your current lender may charge an exit fee when refinancing.
Applications are subject to credit approval, satisfactory security and minimum deposit requirements. Full terms and conditions are found on our Unloan Terms and Conditions. Modified Terms and Conditions will be set out in our Notice of Variation Agreement, if you are approved. This article is intended to provide general information only. It does not have regard to the financial situation or needs of any reader and must not be relied upon as financial product advice.
