Question 1

How is my maximum borrowing amount calculated?

Accepted Answer

The maximum borrowing amount is calculated by working backwards from the monthly payment you can afford. Using the standard amortization formula in reverse, the calculator determines the largest loan principal that would result in your available monthly payment at the given interest rate and loan term. Your available payment is your monthly income minus your monthly expenses.

Question 2

What factors affect how much I can borrow?

Accepted Answer

The key factors are your monthly income, existing monthly expenses and commitments, the interest rate offered by the lender, and the loan term. A higher income, lower expenses, lower interest rate, or longer term all increase the amount you can borrow. Lenders also consider your credit score, employment stability, and existing debts when determining your borrowing limit.

Question 3

How does the loan term affect how much I can borrow?

Accepted Answer

A longer loan term increases the amount you can borrow because the repayments are spread over more months, reducing each monthly payment. However, a longer term also means you pay significantly more interest over the life of the loan. For example, extending from 20 to 30 years may let you borrow more, but the total interest cost could be substantially higher.

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