There are many factors that come into play with a home loan application. Banks have individual criteria in deciding how much you can borrow; these include annual income, dependents, deposit/savings, credit history and any outstanding debts that you may have. Credit cards come into play by the limit that you have on your current credit card/credit cards. How much does a high limit credit card effect your borrowing potential? This varies from bank to bank depending on other factors that based on a case by case study.

Case Study – HSBC Home Loan Calculator

Below is an example of how banks can calculate how much you can borrow depending on your current credit card limit.

This illustration demonstrates your borrowing potential without any credit card limit. As you can see with an interest rate of 6,79% over 30 years and a monthly gross income of $4,000 you borrowing potential is around $400,000.

Now lets take a look at the difference in borrowing potential when we put a credit card limit of $7,000 into the equation.

As you can see all thins being equal, a credit card limit of $7,000 reduces the amount you can potentially borrow on a home loan by $15,000. The home loan calculator tool can only be used as a guide to borrowing potential, the true effect of credit card limits will be dependent on an individuals circumstances.

There is no home loan equation that is set in stone. The illustration above is just one example of how a home loan can be calculated. However one thing that we can be sure of is that credit card limits and debts can potentially reduce your borrowing potential in certain circumstances.

The information above is not classified as financial advise. If you are considering applying for a home loan or a new credit card we suggest that you seek to guidance of a qualified financial professional. When looking for a home loan; comparison,  research and professional advise can potential save you thousands in interest repayments and reduce the loan repayment period.

Currently there are many mortgage brokers in Australia who can give you professional advice on how/if any borrowing potential can be lost due to your credit card limit. One such organization is Aussie and below is further information on what they can do to help you find a home loan to suite your needs.