How Much Can I Borrow ?
Understanding Your Home Loan Borrowing Capacity
When you’re ready to buy a home, one of the first questions you’ll ask is: “How do I calculate how much I can borrow for a home loan?” Your borrowing capacity depends on several important factors that lenders look at carefully.
What Affects How Much You Can Borrow?
Your Income Lenders look at your salary, wages, and any other regular income you receive. If you’re self-employed, they’ll want to see your business income over the past two years. The more you earn, the more you can typically borrow.
Your Expenses Banks carefully review what you spend each month. This includes rent, groceries, utilities, car loans, credit cards, and other living costs. Lower expenses mean you can borrow more.
Your Deposit The amount you’ve saved for a deposit affects your borrowing power. A larger deposit (usually 20% or more) often means you can borrow more and get better interest rates.
Your Debts Existing debts like credit cards, personal loans, or car loans reduce how much you can borrow. Even if you don’t use your credit card, lenders count the full limit as potential debt.
The Borrowing Capacity Formula
Most Australian banks use a similar calculation. They look at your income, subtract your expenses and existing debts, then work out how much you can afford to repay each month. They also test if you could still afford repayments if interest rates increased by 2-3%.
Typical Borrowing Amounts
As a general guide, many Australians can borrow between 5 to 6 times their annual income. However, this varies greatly depending on your individual situation.
Example:
- Annual income: $80,000
- Potential borrowing: $400,000 – $480,000
- With a partner earning $60,000: $700,000 – $840,000
How to Increase Your Borrowing Capacity
- Reduce existing debts – Pay off credit cards and personal loans
- Lower your expenses – Cut unnecessary spending for a few months before applying
- Increase your deposit – Save more to reduce the loan amount needed
- Close unused credit cards – Even empty cards affect your borrowing power
- Improve your credit score – Pay bills on time and avoid defaults
Get an Accurate Assessment
Every lender has different policies and calculators. At Awesome Lending Solutions, we can assess your situation and find lenders who will offer you the best borrowing capacity for your circumstances.
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