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How Much Can I Borrow Home Loan?

How much can I borrow for a house?

If you're thinking about investing in property, one of the first questions you will ask when taking out a home loan in Australia is 'how much can I borrow?'.

There are a number of factors that can contribute to how much you can borrow for a home loan and, as a potential homebuyer, it's important that you know what type of mortgage payments are within your budget.

Your income and assets

Regular income is key to how much you can borrow for a home loan.

As a general rule, your monthly mortgage payment on your home loan should not exceed 30% of your monthly take-home pay.

Part-time or overtime income will be viewed more favourably if you can demonstrate consistency over time.

You will also be able to borrow a larger loan amount if you have any existing assets that you can offer as security (for example, another property).

Your expenses and debts

As a homebuyer, how much you can borrow is also dependent on your amount of existing financial commitments.

A lot of existing costs and debt means you have less income to allocate to your home loan repayments and lenders may consider you to be a high credit risk.

It may be wise to reduce your other loans and expenses before trying to obtain a home loan.

If you already have a lot of debt, speak to your mortgage broker about options for debt consolidation.

Debt consolidation could save you thousands of dollars per year and can sometimes improve valuable credit ratings.

Your deposit and savings

The amount of your deposit and ability to save will not only show the lender how serious you are about buying a home, it will affect how much you can borrow for a home loan.

You should have a deposit of around 10% of the cost of the property you want to buy, though 20% deposit will mean you avoid Lender's Mortgage Insurance.

Credit history

Your past credit history will play a large role in determining your interest rates, which will affect how much you can borrow for your home loan.

If a lender finds you are at a higher credit risk due to a bad credit history, you may find you are paying a higher interest rate, which means you're not able to borrow as much.

It's a good idea to review your credit history.

Visit the Australian Securities and Investments Commission (ASIC) website for more information.

Your loan term

Although you will end up paying more interest in the long run, you will find that you can borrow a larger home loan amount if you request a loan term of 25-30 years, compared to a shorter term of 15 years.

Loan purpose

Depending on the reason you require the loan depends on how much you can borrow.

As a property investor can get rental income and benefits from their investment, they are more likely able to borrow more for an investment property.

Interest rates

When you look at an interest rate, all you see is a number. Hopefully, it's a single digit that's comparable with current market rates.

Most homebuyers already know that their interest rate affects their monthly payment which, in turn, is determined by the borrower's income.

Lower interest rates mean that you can afford a larger principal loan amount, which means you can borrow more for a home loan.

Download PDF Version of "How much can I borrow home loan?"

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