If you’re thinking about buying a home, one of the first questions you’ll probably ask is: how much can I actually borrow?
Your home loan borrowing capacity can determine the properties you can realistically consider, the deposit you may need and whether now is the right time to buy.
While online borrowing calculators can give you a rough estimate, lenders look at much more than your income when deciding how much they’re prepared to lend.
At Fundli, we help home buyers across the Sunshine Coast, Gympie and Australia-wide understand their borrowing capacity and compare home loan options from a broad panel of lenders.
Your borrowing capacity is the amount a lender may be willing to lend you based on your financial circumstances.
It isn’t necessarily the same across every bank or lender.
Two lenders can look at the same borrower and arrive at different results because their lending policies, assessment methods and treatment of income and expenses can vary.
This is one reason working with a mortgage broker can be helpful. Rather than relying on the borrowing assessment of one bank, a broker can consider a range of lenders and identify options that may be suitable for your circumstances.
Lenders consider a range of factors when assessing a home loan application.
Your income is an important part of calculating borrowing capacity.
Depending on your circumstances, lenders may consider income from sources such as:
Not every lender treats each type of income in exactly the same way, particularly if your income varies throughout the year.
Existing debts can reduce your borrowing capacity because lenders need to consider the repayments you’re already responsible for.
These may include:
Even if you regularly pay your credit card balance in full, the card’s available limit can still be relevant to a lender’s assessment.
Lenders also assess your regular household expenses to understand how much of your income is available to service a mortgage.
This can include expenses such as:
Providing an accurate picture of your expenses is an important part of the home loan application process.
The size of your deposit can affect the home loan options available to you.
A larger deposit generally means you need to borrow a smaller proportion of the property’s value.
However, you don’t necessarily need a 20% deposit to purchase a home.
Depending on your circumstances, lender and eligibility for applicable home buyer schemes, purchasing with a smaller deposit may be possible.
You also need to consider costs beyond the purchase price, including conveyancing, inspections and applicable government charges.
Your credit history can also influence a lender’s decision.
Lenders may review your credit report to understand how you’ve managed credit previously, including existing accounts, repayment history and credit enquiries.
A credit issue doesn’t automatically mean you can’t obtain a home loan, but it may affect which lenders and products are available.
A common misconception is that lenders simply calculate borrowing capacity using the interest rate advertised on a home loan.
In reality, lenders generally assess whether you could continue making repayments if interest rates were higher than the rate you receive.
This is known as a serviceability buffer.
As a result, your maximum borrowing capacity can change as interest rates, lending policies and your personal circumstances change.
If your current borrowing capacity isn’t where you’d like it to be, there may be areas of your finances worth reviewing before applying for a home loan.
Depending on your circumstances, this could include reducing personal debt, reviewing unused credit card limits, increasing your deposit or improving your overall financial position.
However, borrowing the maximum amount available isn’t necessarily the right goal.
A home loan needs to remain manageable alongside your other financial commitments and lifestyle.
There can be a significant difference between how much you can borrow and how much you’re comfortable borrowing.
For example, a lender may approve a certain amount based on its lending criteria, but that doesn’t mean you necessarily need to spend up to that limit.
Before deciding on your property budget, consider how your repayments would fit alongside your regular expenses and other financial goals.
It can also be worth considering how your household budget would cope if circumstances changed in the future.
Yes.
This is particularly important for borrowers with circumstances that aren’t completely straightforward.
Different lenders can have different approaches to:
The lender offering the lowest advertised interest rate may therefore not necessarily be the lender that suits your circumstances.
Getting your financial position assessed before seriously searching for a property can give you a much clearer idea of your potential budget.
Depending on the lender and your circumstances, home loan pre-approval may also be available.
This can help you narrow your property search and avoid spending time looking at homes significantly outside your borrowing range.
Remember that pre-approval is generally conditional and isn’t a guarantee of final loan approval.
A mortgage broker can assess your financial circumstances and compare lending options across multiple lenders.
At Fundli, we can help you understand:
We can then manage the application process and liaise with the lender through to settlement.
There isn’t one borrowing amount that applies to everyone. Your borrowing capacity will depend on your income, expenses, existing debts, deposit, dependants and other financial circumstances, as well as the lender’s individual assessment criteria.
It can. Lenders may take your credit card limit into account when assessing your liabilities, even if you don’t currently owe the full amount.
Having a HECS or HELP debt doesn’t automatically prevent you from obtaining a home loan. However, compulsory repayments can affect your disposable income and therefore may influence your borrowing capacity.
A mortgage broker can’t simply make a lender approve a larger loan. However, because lenders can assess borrowers differently, a broker can compare lending criteria across multiple lenders to identify options appropriate for your circumstances.
Not always. Some borrowers may be able to purchase with a deposit below 20%, although lender requirements, Lenders Mortgage Insurance and other conditions may apply.
Yes. Fundli assists clients from its Sunshine Coast and Gympie locations and can also work with borrowers Australia-wide through phone and online appointments.
If you’re planning to purchase a home, understanding your borrowing position is a great place to start.
Whether you’re a first home buyer, moving home, investing or simply beginning to explore your options, Fundli can assess your circumstances and help you understand the home loan options available to you.
With appointments available on the Sunshine Coast and in Gympie, as well as phone and online appointments for clients Australia-wide, getting started is simple.
The amount you may be able to borrow depends on your income, living expenses, existing debts, deposit, dependants and overall financial position. Each lender also has its own lending criteria, so your borrowing capacity can vary between lenders.
Lenders generally assess your income against your existing debts, financial commitments and living expenses. They also assess your ability to make repayments at a higher interest rate than the actual loan rate to account for potential changes in rates.
Yes, it can. Lenders may consider your total credit card limits when calculating your borrowing capacity, even if you regularly pay the balance in full. Reviewing unused or unnecessarily high credit limits before applying for a home loan may be worthwhile.
A HECS or HELP debt doesn’t automatically prevent you from getting a home loan. However, compulsory repayments can affect your available income and may therefore influence how much a lender is prepared to lend.
You don’t necessarily need a 20% deposit to purchase a property. Some lenders may accept smaller deposits, although Lenders Mortgage Insurance and additional lending requirements may apply. Eligible buyers may also have access to government home buyer schemes.
Yes. A mortgage broker can assess your financial position and compare how different lenders may view your application. At Fundli, we can help you understand your potential borrowing capacity, deposit requirements and suitable home loan options before you start looking for a property.
Not necessarily. Your maximum borrowing capacity is based on a lender’s assessment, but it’s important to consider what repayments you’re personally comfortable with. Your mortgage should fit alongside your everyday expenses, lifestyle and other financial commitments.
Yes. Having your borrowing capacity assessed before looking seriously at properties can give you a clearer idea of your potential purchasing budget. Depending on your circumstances, you may also be able to apply for home loan pre-approval.
Yes. Fundli helps first home buyers, home owners and investors across Gympie and the Sunshine Coast, with Australia-wide appointments also available by phone or Microsoft Teams.
