How much can you borrow for a home loan?

When you're thinking about buying a property, one of the first things you'll want to know is much money you'll be able to borrow.

The amount you can borrow for a home loan will have an impact on the type of properties you look at, as well as the suburbs you consider.

How much you can borrow for a home loan is determined by a number of things.

Here's a breakdown of what might determine how much you can borrow.

Income and expenses

Your income is a good guide when figuring out how much you can afford to repay on your loan every month. Look at your living expenses and financial commitments to assess how much of your salary you have left over to cover home loan repayments. A sound budget will give you confidence that you won’t be overstretching yourself.

Our Borrowing Capacity Calculator can give you an estimate of the loan amount.

Deposit savings

The bigger your deposit, the smaller your loan will be and the less interest you’ll have to pay. Ideally, you should save as much as possible before buying a home. The minimum required deposit is 10%, but aim for 20% if possible. If you’re borrowing more than 80% of the property value, you’ll need to take out Lenders’ Mortgage Insurance or Low Deposit Premium.

There are some other upfront costs outside the deposit, including legal fees, stamp duty, moving costs and insurances. Make sure to account for these when creating a savings plan.

Saving history and credit rating

Saving for a deposit is a great way to show that you’ll be able to manage home loan repayments. Three months or more is a good demonstration of your saving abilities.

The lender will also look at your credit rating, which is based on your borrowing and repayment history, including how often you’ve shopped around for credit. There are several credit reporting agencies you can use to check your rating online.

Support for first home buyers

The First Home Owner Grant is a government scheme that provides a one-off payment to first home owners. The grant amount, eligibility criteria and payment details of a First Home Owner Grant all vary among the states and territories. The grant is usually paid at the time of property settlement to your home loan lender and applied directly to your home loan.

You can check with our home First Home Buyer pages to find out specific details for of the Federal Government’s First Home Owner Grant.

Type and length of home loan

The type of home loan and its associated interest rate will affect your borrowing power. The lower the interest rate, the lower your minimum repayments will be. Stretching your loan out over a longer term might mean you can borrow more, but will increase the total amount of interest you will end up paying by the end of the loan period.

The price of the property

As part of your home loan application, the lender may do a valuation of the property to determine how much they are willing to lend.

Source Commonwealth Bank

This information has been prepared by PHA Financial Services and does not take into account your objectives, financial situation or needs. Before acting on this information you should consider whether it is appropriate to your situation. We recommend you obtain financial, legal and taxation advice before making any financial investment decision. The information provided was accurate at the time of publication and changes in circumstances after a document is published may impact on the accuracy of information. Some information may have been collated from various third parties and we make no assertion that the information was originally ours.