What’s my monthly repayment capacity on a loan? There’s a rough formula you can use: Gross income – tax – existing commitments – new commitments – living expenses – emergency fund = monthly surplus.
If that looks a bit complex, try using our new how much can I borrow calculator first. It will help you work up to the loan repayment question in steps.
The borrowing calculator is a great way to learn how to play around with your finances and lifestyle costs and learn about budgeting – your incomings and outgoings.
You'll also find in playing around with the calculator you'll increase your knowledge of financial terms and concepts.
Once you’ve worked out how much you can afford to borrow for that first home or investment property, use our other calculators to discover more. There’s also a whole bunch of answers to home buying questions you might have about terms like borrowing power, equity, and even LVR – loan to value ratio.
Increase borrowing power
One thing many of us want to know, once we’ve committed to a savings goal, is how to increase our borrowing power. Increasing your power depends on how much you earn and what you spend but here are some tips:
- Reduce your credit limit – close any unused credit cards
- Pay down your debts, like personal loans
- Lower your spending
- Keep a good credit score
- Split your liabilities with a partner if you’re borrowing on your own
- Start or keep saving to demonstrate a good savings history.
What is financial confidence?
The mindset, skills, and ability to be self-sustaining in whatever economic conditions you find yourself is one way of defining financial confidence. Without the three parts of the equation working together it's difficult to build financial confidence.
Understanding how you budget builds your skills and knowledge and bolsters your mindset and abilities which in turn helps build more skills.
You may find these Ruby articles on: credit cards and Spring cleaning your finances, helpful.