Succeeding at auction – Understanding your borrowing capacity

If you're thinking about buying real estate in Australia, one of the first things you should ask yourself is how much can I borrow?

After all, understanding how much your potential home loan could be can play a big role in the types of property you decide to seriously consider during your search.

These days, chances are you'll be bidding for your property in an auction, so having your finances sorted out before approaching the market is a good way to ensure a more prepared buyer doesn’t swoop in and steal your dream home from right out under you.

One of the first things to consider is your borrowing capacity. Simply put, this figure is how much a potential lender will be willing to put toward your home loan and is available for bidding purposes.

By taking your income, expenses and the value of the property into account, you can calculate your potential borrowing capacity using any number of online home loan calculators.

However, it is important to remember that these amounts are only estimates. It is recommended you get in contact with one of Mortgage Choice's mortgage brokers in order to sit down, have a consultation, and accurately calculate how much is available for you to bid with.

Another aspect that is crucial to remember during the heat of a bidding battle is to not exceed your financial limit. It's better to lose your dream home than to take on a home loan you're unable to pay, and get entangled in a crippling debt.

Furthermore, having your home loan pre approved could go a long way to ensuring you obtain your dream property. By ensuring you're ready to sign the papers as soon as the auction finishes, you're that much more likely to succeed in your real estate endeavours.