How much money can I borrow for a home loan?
If you're wondering 'how much can I borrow for a home loan', then we can help you!
How much money you can borrow will depend on your financial situation, your mortgage repayments, the type of property you want to purchase and your overall application. Learn more with our handy graphic below.
How much can I borrow for a home loan?
Read on for a more in-depth explanation of four things that go towards calculating how much money you can borrow.
1. Your financial situation
When applying for a loan a lender will look at your financial situation. It’s a good idea to list all of your assets and liabilities so you have a clear picture of where you are at financially. A lender will take into account the following:Savings
How much you have saved for a deposit and your savings history will make a difference to the amount of money you can borrow. It’s important to remember the bigger a deposit you have, the less money you will have to borrow, and this can affect the amount of interest you will pay in mortgage repayments each month.Income and Expenses
Your income and expenses will have an effect on how much you can borrow. A solid track record of employment and a history of regular savings in your bank account will make it easier for you to get a home loan. Lenders want to see evidence of good financial management, to ensure they aren’t taking unnecessary risks. You can do this by using a separate savings account with a higher interest rate to make regular deposits and limited withdrawals. *Lenders will take into account any other loans you have and the repayments associated with these loans. As well as this, lenders will generally check bank statements for the last three to six months when assessing a loan application. This means it’s important to keep your bank account in order, ensure there are no late payments and that your account doesn’t get overdrawn.
Credit history
Most lenders will do a credit file check as part of a loan application. The details on your credit history file can mean the difference between having a loan approved or not. Your credit history will list any instances where you have applied for credit, the outcome of those applications and any credit default information registered by a third party. You can check your credit history via credit bureaus such as Equifax Pty Ltd (www.equifax.com.au).2. Your mortgage repayments
Mortgage repayment calculators can give you an indication of what your repayments might be for a particular loan amount.
By playing around with calculators, you’re able to consider how much you are comfortable paying each month in mortgage repayments. Remember, it’s important to not only make your mortgage repayments comfortably each month, but to also have enough money for emergencies or unexpected costs.
Our home loan repayment calculator helps you estimate the true cost of your purchase. It takes into account expenses people often forget about when purchasing a property such as stamp duty, rates, insurance, maintenance and more.
3. What kind of property you want to purchase
The kind of property you are looking at buying will have an effect on the amount you can borrow. A lender will take into account the value of the property. A valuation carried out on behalf of a lender takes into account the value of the property over the longer term, as well as any current trends in the market. Lenders use the property to secure the loan, so it’s important they can sell the property to recoup any costs, should you be unable to pay mortgage repayments.
For more information about property valuation check out our popular post on preparing your home for a valuation.
If you’re looking at buying an investment property to rent, the lender will most likely take into account the amount of rent you expect to receive for the property as part of the overall loan application process.
4. Your application
At the end of the day, how much you can borrow will be guided by your lender. Lenders and financial institutions have a responsibility to ask questions to ensure the amount you borrow suits your financial situation and that you'll be able to make the necessary repayments each month. Your lender will also look at your credit report and credit history.
Talk to a lender to discuss your situation and to find out how much you can borrow. By talking to a lender you’ll find out exactly what they will require from you for an application, and they’ll be able to go through different types of loans, rates and loan amounts and discuss how they affect mortgage repayments.
Next steps
If you'd like to get a calculated estimate of your home loan borrowing power, you can use our online home loan borrowing bower calculator.
Remember, we offer pre-approval on home loans so you can shop for a property with more confidence. To organise a home loan pre-approval enquire online, call 13 14 22 or drop into your nearest branch and chat with one of our lending specialists.