1. What is Borrowing Power?

Borrowing power refers to the maximum loan amount you can afford based on your income, expenses, and current interest rates. It helps determine how much you can borrow for a home loan while maintaining comfortable repayments.

2. How Does the Calculator Work?

The calculator uses the borrowing power formula:

Where:

• \( P \) — Maximum loan amount (principal)
• \( PMT \) — Affordable monthly payment
• \( r \) — Monthly interest rate (annual rate ÷ 12)
• \( n \) — Total number of payments (term in years × 12)

Explanation: The formula calculates the present value of an annuity (series of equal payments) considering the interest rate and loan term.

3. Importance of Borrowing Power Calculation

Details: Knowing your borrowing power helps set realistic home purchase budgets, prevents over-commitment, and ensures you can comfortably meet repayment obligations.

4. Using the Calculator

Tips: Enter your comfortable monthly payment, current interest rate, and desired loan term. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: How accurate is this calculator?
A: It provides a good estimate, but actual borrowing power may vary based on lender policies, credit history, and other financial commitments.

Q2: What factors affect my borrowing power?
A: Key factors include income, expenses, interest rates, loan term, credit score, and existing debts.

Q3: Should I borrow my maximum amount?
A: Not necessarily. Consider future expenses, interest rate rises, and lifestyle needs before borrowing your maximum capacity.

Q4: How often should I check my borrowing power?
A: Recalculate whenever your financial situation changes or interest rates move significantly.

Q5: Does this include other home buying costs?
A: No, this calculates loan amount only. Remember to account for deposit, stamp duty, legal fees, and other purchase costs.