How much should you borrow for a mortgage?
No matter which path you take with your deposit and securing a loan approval, it’s essential to calculate your personal finances to give you a better idea of just how much you should (not ‘could’) borrow. Here are five things to consider before taking out a mortgage.
1. Household income
When assessing your finances, ask yourself what kind of lifestyle you want. Are you single? Married? Have a baby on the way? Do you like designer shoes or do you eat out regularly? Ask yourself if you’re willing to make sacrifices and if so, where are you going to reduce your spending? Your household income is one of the first things a lender will look at when determining if you’re eligible for a home loan. If you can show a record or budget of your spending habits per week, this can help prove you’ll be able to meet the repayments required.
2. Credit rating
A credit rating, or credit score, is the next thing a lender will look at to determine how much a risk you are as a borrower. Many people don’t ever check their credit rating and are surprised when their application gets refused. It’s a good habit to check your credit rating once a year to make sure you’re either on the right track or working towards improvement.
3. Property price and value
The next thing a lender will assess is the type of property you’re interested in and what purpose you’re buying the property for. Is it an investment property or are you looking to live in the home as an owner-occupier?
Another important thing to consider is the value or potential future value of the property you’re purchasing. Are you buying a house, apartment or land?
These questions will all have an impact on your borrowing power.
4. Home insurance
Home insurance is designed to protect your property from damage caused by events out of your control. As your home is your biggest investment, it’s important you ensure you’re able to afford home insurance before applying for a home loan.
5. Other costs
Similar to home insurance, there are a number of costs (both upfront and ongoing) associated with buying and owning a property. A few of these include stamp duty, LMI (if applicable), home loan establishment fees, legal and inspection costs, council rates, water utility rates and general property maintenance.
Buying a home is a big decision and should not be taken lightly. Assessing your borrowing capacity is just one of the ways to determine how much you can borrow for a home loan, but working out how much you should borrow will always be a personal decision based on a raft of other individual factors including how much risk you can tolerate and how much you are willing to sacrifice to ensure that you can make the most of your valuable property purchase.
Looking for a home loan?
Buying a home or looking to refinance? The table below features home loans
with some of the lowest interest rates on the market for owner occupiers.
Lender | |||||||||||||
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Variable | More details | ||||||||||||
FEATUREDOnline ExclusiveUp To $4K Cashback | loans.com.au – Variable Basic Cashback Home Loan (Principal and Interest) (LVR < 70%)
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loans.com.au – Variable Basic Cashback Home Loan (Principal and Interest) (LVR < 70%)
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Variable | More details | ||||||||||||
FEATUREDRefinance OnlyApply In Minutes | Unloan – Variable Rate Home Loan – Refinance Only
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Unloan – Variable Rate Home Loan – Refinance Only
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Variable | More details | ||||||||||||
FEATUREDUnlimited Redraws | ubank – Neat Variable Home Loan (Principal and Interest) (LVR < 60%)
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ubank – Neat Variable Home Loan (Principal and Interest) (LVR < 60%)
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Variable | More details | ||||||||||||
4.6 Star Customer Ratings | |||||||||||||
loans.com.au – Variable Home Loan (LVR < 90%) | |||||||||||||
Fixed | More details | ||||||||||||
Macquarie Bank – Basic Home Loan Fixed (Principal and Interest) (LVR 70%-80%) 3 Years | |||||||||||||
Variable | More details | ||||||||||||
ubank – Neat Variable Home Loan (Principal and Interest) (LVR ≤ 80%)
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ubank – Neat Variable Home Loan (Principal and Interest) (LVR ≤ 80%)
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Variable | More details | ||||||||||||
Macquarie Bank – Offset Package Home Loan (Principal and Interest) (LVR 60%-70%)
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Macquarie Bank – Offset Package Home Loan (Principal and Interest) (LVR 60%-70%)
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Variable | More details | ||||||||||||
Athena – Straight Up Owner Occupied - Obliterate (LVR < 50%) (Principal and Interest)
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Athena – Straight Up Owner Occupied - Obliterate (LVR < 50%) (Principal and Interest)
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Fixed | More details | ||||||||||||
Westpac – Premier Package Fixed Options Home Loan (Principal and Interest) 1 Year (LVR < 70%) | |||||||||||||
Variable | More details | ||||||||||||
Commonwealth Bank – Wealth Package Variable Home Loan (Principal and Interest) (LVR 70% - 80%) | |||||||||||||
Variable | More details | ||||||||||||
NAB – Base Variable Home Loan (Principal and Interest) (New Customer) | |||||||||||||
Fixed | More details | ||||||||||||
ANZ – Fixed Rate Home Loan (Principal and Interest) 5 Years (LVR < 80%) | |||||||||||||
Variable | More details | ||||||||||||
Heritage Bank – Discount Variable Home Loan ($150k+) (LVR < 70%) | |||||||||||||
Variable | More details | ||||||||||||
P&N Bank – & Basic Home Loan (LVR < 60%) | |||||||||||||
Fixed | More details | ||||||||||||
Newcastle Permanent – Premium Plus Package Fixed Rate Home Loan Special (Principal and Interest) 2 Years | |||||||||||||
Fixed | More details | ||||||||||||
Commonwealth Bank – Fixed Rate Home Loan (Principal and Interest) 3 Years | |||||||||||||
Fixed | More details | ||||||||||||
HSBC – Package Fixed Rate Home Loan (Principal and Interest) 4 Years (LVR < 80%) | |||||||||||||
Fixed | More details | ||||||||||||
IMB Bank – Fixed Rate Home Loan (Principal and Interest) 3 Years (LVR ≤ 80%) | |||||||||||||
Fixed | More details | ||||||||||||
ING – Fixed Rate Home Loan 5 Years (LVR < 80%) | |||||||||||||
Fixed | More details | ||||||||||||
Newcastle Permanent – Fixed Rate Home Loan (Principal and Interest) 5 Years |
- Immediate cashback upon settlement
- $2,000 for loans up to $700,000
- $4,000 for loans over $700,000