Like all good cheat sheets, we’ll keep it short, sharp and to the actual point.
<aside>
💡
TL:DR
- Borrowing is typically 5-6 times your gross annual salary (adjusted for liabilities)
- You can use vested shares if listed on a well-recognised stock exchange
- Credit cards reduce borrowing by 5-7 times the card limit (even if unused)
- HEC’s debt reduced borrowing by ~$40k-$60k
- Each child you have under 18 reduced borrowing by ~$50k
</aside>
Income
Base Salary: The Core of Borrowing Power
Your base salary is the foundation of your borrowing capacity. Most lenders calculate it using a simple multiplier, typically 5-6x your gross annual salary.
- Example Calculation: Base Salary: $150,000Borrowing Capacity: $150,000 × 5 = $750,000
This is your starting figure, but additional income streams like bonuses and commissions can increase this.
Vested Shares:
Vested shares can count as bonus income, but lenders follow strict rules:
- You must work for a well-known multinational listed on a recognized stock exchange.
- A vesting schedule with at least three years of history is required.
- Lenders use the lower of:
- The most recent year’s vested shares.
- The average of the last two years.
Example Calculation:
- Year 1: $60,000
- Year 2: $50,000
Lower of Year 2 or Average: $50,000
Adjusted Income (with shading):