The amount you can borrow for a home loan usually lands somewhere between 4 and 6 times your gross annual income, but the real figure depends on your income, existing debts, living expenses, deposit size and the interest rate a lender uses to “stress test” your repayments. Below is how it’s actually worked out — and how to lift your number.
What lenders look at
- Income — salary, overtime, bonuses, and for self-employed borrowers, your business profit.
- Existing commitments — credit cards, car loans, HECS/HELP and other repayments all reduce your borrowing power.
- Living expenses — lenders apply a minimum benchmark (the HEM) even if you spend less.
- The assessment rate — lenders test your repayments at roughly 3% above the actual rate to make sure you can cope if rates rise.
- Your deposit — a larger deposit lowers your loan-to-value ratio and can help you avoid Lenders Mortgage Insurance.
A quick example
A single applicant earning $90,000 a year with no other debts might borrow around $450,000–$500,000. Add a $500-a-month car loan and that figure can fall by $30,000 or more — which is why clearing small debts before you apply often makes a bigger difference than people expect.
How a mortgage broker helps
Every lender calculates borrowing power differently — the same applicant can be offered tens of thousands of dollars more (or less) depending on how a lender treats bonuses, HECS or living expenses. As a Berwick-based broker, Domain Finance Australia compares your numbers across multiple lenders to find the one that reads your situation most favourably, then handles the paperwork from pre-approval to settlement.
This information is general in nature and does not take into account your personal objectives, financial situation or needs. All loans are subject to credit assessment.