How Much Can You Borrow for a Home Loan in Australia?

Thinking about buying a home? One of the first things you’ll need to figure out is how much you can actually borrow. Your borrowing power isn’t just about your income—it also depends on things like your expenses, debts, credit history and how lenders assess your finances.

Getting a clear idea of your budget early on can save you time and help you focus on properties that are realistically within reach. 

In this guide, we’ll break down how borrowing capacity works, what impacts it and how you might be able to borrow more. Keep reading to get the full picture before you dive into house hunting!

Key Factors That Determine Your Borrowing Power

Lenders assess several factors before determining how much they are willing to lend you. Here are the most important ones:

Income and Expenses

Your income plays a major role in how much you can borrow. Lenders assess your salary, rental income (if applicable), bonuses and any other sources of earnings. At the same time, they consider your regular expenses, including rent (if you’re still renting), groceries, utilities and discretionary spending.

Credit History and Score

Your credit score reflects your history of managing debts and repayments. A strong credit score can improve your chances of borrowing more, while a low score may lead to stricter lending conditions or a lower borrowing amount.

Deposit Size

The more you can contribute as a deposit, the higher your chances of securing a larger loan. Typically, lenders prefer a 20% deposit to avoid Lenders Mortgage Insurance (LMI), but some may accept lower deposits with additional conditions.

Existing Debts and Liabilities

Lenders consider any outstanding debts, such as personal loans, car loans or credit card balances. If you have multiple liabilities, it may reduce the amount you can borrow.

Interest Rates and Loan Term

The interest rate you’re offered impacts your borrowing power. Lower interest rates mean lower monthly repayments, allowing you to borrow more. The length of your loan term also affects your repayments – a longer loan term generally means lower repayments but more interest paid over time.

How to Calculate Your Borrowing Power

Most banks and lenders provide online mortgage calculators to estimate how much you can borrow. While these tools offer a general guide, speaking to a mortgage broker can give you a more accurate picture based on your personal financial situation.

Lenders look at things like your income, expenses, existing debts and credit score to work out how much they’re willing to lend you. They also factor in interest rate changes to make sure you can still afford repayments if rates go up.

So, while calculators are a good starting point, a broker can help you understand the finer details and find a loan that actually works for you.

Maximising Your Borrowing Power

If you're looking to increase your borrowing capacity, consider these strategies:

• Reduce existing debts: Pay off credit cards and personal loans before applying.
• Improve your credit score: Make timely repayments and avoid excessive credit applications.
• Increase your savings: A larger deposit can improve your loan eligibility and reduce costs.
• Choose the right lender: Different lenders have varying criteria – a mortgage broker can help find the best fit for you.

Get Expert Advice

Understanding how much you can borrow is the first step towards homeownership. At ALCHEMYFIN, we provide tailored mortgage advice to help you secure the best loan for your needs. Get in touch with our expert team today to start your journey towards owning your dream home.