1. What is the Borrow Power Equation?

The Borrow Power equation calculates the borrowing capacity for investment properties based on income, expenses, and a lending factor. It helps investors determine how much they can borrow for property investments.

2. How Does the Calculator Work?

The calculator uses the Borrow Power equation:

Where:

• \( Income \) — Total income (currency)
• \( Expenses \) — Total expenses (currency)
• \( Factor \) — Lending factor (unitless)

Explanation: The equation calculates disposable income (income minus expenses) and multiplies it by a lending factor to determine borrowing capacity.

3. Importance of Borrow Power Calculation

Details: Accurate borrowing power calculation is crucial for investment property planning, loan applications, and financial decision-making in real estate investments.

4. Using the Calculator

Tips: Enter income and expenses in currency units, and the lending factor as a unitless value. All values must be non-negative.

5. Frequently Asked Questions (FAQ)

Q1: What is included in income?
A: Income typically includes salary, rental income, investments, and other regular sources of revenue.

Q2: What expenses should be considered?
A: Include living expenses, existing loan repayments, taxes, and other regular financial obligations.

Q3: How is the factor determined?
A: The factor is usually determined by lenders based on risk assessment, interest rates, and lending policies.

Q4: Is this calculation accurate for all lenders?
A: Different lenders may use different formulas and factors. This provides a general estimate.

Q5: Can this be used for other types of loans?
A: While designed for investment properties, the concept can be adapted for other borrowing scenarios with appropriate adjustments.