How much money can I borrow?

When taking out a home loan, everyone’s existing and future financial situations are going to be somewhat unique – so let’s first take a look at what the lending industry thinks before investigating the additional factors that are likely to be applicable to you as an individual.

The lending industry indirectly recommends that people not borrow more than 80% of the property value through the general application of policies which enforce that borrowers pay for Lenders Mortgage Insurance (LMI) in order to be approved for a loan worth more than that.

Effectively, they are saying that buyers should have at least a 20% property deposit saved. A 20% deposit on a $450,000 house is $90,000!

Essentially, lenders are protecting themselves from a situation where:

  • a borrower ‘defaults’ on the mortgage (unable to pay or ‘service’ the loan), forcing the bank to repossess the property AND
  • the value of the property has fallen to be worth less than what’s owed on the mortgage

In this situation, the lender might not be able to fully recover what’s owed to it by selling the repossessed property – resulting in a loss for the lender.

Can’t afford a 20% deposit?

You may still be able to be approved for a home loan with a deposit of under 20% of the property’s value. For many lenders, the minimum required deposit is often 5%.

But there are two things you should consider when applying for a home loan with a deposit under 20%:  

  1. Lender’s mortgage insurance: Typically, borrowers that don’t have a deposit of at least 20% are required to pay for LMI, which can add tens of thousands to the cost of the mortgage, depending on the lender and what loan-to-value ratio (LVR) percentage you have.  
  2. Guarantors: If you can get one of your family members to act as a guarantor, you may be approved for the mortgage without having to pay LMI. To be successful, the family member must be able to demonstrate either their own capacity to repay your loan and be willing to be liable for your home loan if you default on a payment or to put their own property equity forward as collateral.

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

Variable
More details
UNLIMITED REDRAWSSPECIAL OFFER
  • Fast turnaround times, can meet 30-day settlement
  • For purchase and refinance, min 20% deposit
  • No ongoing or monthly fees, add offset for 0.10%
UNLIMITED REDRAWSSPECIAL OFFER

Smart Booster Home Loan Discounted Variable - 2yr (LVR < 80%)

  • Fast turnaround times, can meet 30-day settlement
  • For purchase and refinance, min 20% deposit
  • No ongoing or monthly fees, add offset for 0.10%
Variable
More details
AN EASY DIGITAL APPLICATION
  • No ongoing fees - None!
  • Unlimited additional repayments
  • Easy online application, find out if you're approved quick!
  • Redraw- Access your additional payments if you need them
  • Use the app to get loan insights to help you pay off your home loan faster
AN EASY DIGITAL APPLICATION

Neat Variable Home Loan (Principal and Interest) (LVR < 60%)

  • No ongoing fees - None!
  • Unlimited additional repayments
  • Easy online application, find out if you're approved quick!
  • Redraw- Access your additional payments if you need them
  • Use the app to get loan insights to help you pay off your home loan faster
Variable
More details
100% FULL OFFSET ACCOUNTNO APPLICATION FEE OR ONGOING FEES
  • No upfront or ongoing fees
  • 100% full offset account
  • Extra repayments + redraw services
100% FULL OFFSET ACCOUNTNO APPLICATION FEE OR ONGOING FEES

Low Rate Home Loan - Prime (Principal and Interest) (Owner Occupied) (LVR < 60%)

  • No upfront or ongoing fees
  • 100% full offset account
  • Extra repayments + redraw services
Variable
More details
NSW/VIC/SA METRO & INNER REGIONAL AREAS$5000 CASHBACK. T&Cs APPLY.
  • No upfront or ongoing fees
  • 100% full offset account
  • Extra repayments + redraw services
NSW/VIC/SA METRO & INNER REGIONAL AREAS$5000 CASHBACK. T&Cs APPLY.

Variable Home Loan (Principal and Interest)

  • No upfront or ongoing fees
  • 100% full offset account
  • Extra repayments + redraw services
Variable
More details
NO UPFRONT OR ONGOING FEES
  • No upfront or ongoing fees
  • 100% full offset account
  • Extra repayments + redraw services
NO UPFRONT OR ONGOING FEES

Low Rate Home Loan - Prime (Principal and Interest) (Owner Occupied) (LVR < 80%)

  • No upfront or ongoing fees
  • 100% full offset account
  • Extra repayments + redraw services
Variable
More details
NO APPLICATION FEES
  • No upfront or ongoing fees
  • 100% full offset account
  • Extra repayments + redraw services
NO APPLICATION FEES

Yard Home Loan (Principal and Interest) (Special) (LVR < 80%)

  • No upfront or ongoing fees
  • 100% full offset account
  • Extra repayments + redraw services
Variable
More details
100% FULL OFFSET ACCOUNT
  • No upfront or ongoing fees
  • 100% full offset account
  • Extra repayments + redraw services
100% FULL OFFSET ACCOUNT

Ocean Owner Occupied (Amounts < $1m, LVR < 60%)

  • No upfront or ongoing fees
  • 100% full offset account
  • Extra repayments + redraw services
Variable
More details
$0 APPLICATION FEE
  • No upfront or ongoing fees
  • 100% full offset account
  • Extra repayments + redraw services
$0 APPLICATION FEE

Budget Home Loan (Principal and Interest) (LVR < 80%)

  • No upfront or ongoing fees
  • 100% full offset account
  • Extra repayments + redraw services
Variable
More details
NO ONGOING FEES
NO ONGOING FEES

Basic Flyer Home Loan (Principal and Interest) (LVR 60%-70%)

    Variable
    More details
    GET A DISCOUNTED GREEN RATE*
    • Low rate home loan with added benefits, add offset for 0.10%
    • Save thousands & make an environmentally conscious choice on your loan for homes less than 12 months old
    • Get a 7.0 star NatHERS rating or higher for up to 1.79% discount on your variable rate home loan T&Cs apply
    GET A DISCOUNTED GREEN RATE*

    Green Home Loan (Principal and Interest)

    • Low rate home loan with added benefits, add offset for 0.10%
    • Save thousands & make an environmentally conscious choice on your loan for homes less than 12 months old
    • Get a 7.0 star NatHERS rating or higher for up to 1.79% discount on your variable rate home loan T&Cs apply
    Variable
    More details
    NO UPFRONT OR ONGOING FEES
    • Low rate home loan with added benefits, add offset for 0.10%
    • Save thousands & make an environmentally conscious choice on your loan for homes less than 12 months old
    • Get a 7.0 star NatHERS rating or higher for up to 1.79% discount on your variable rate home loan T&Cs apply
    NO UPFRONT OR ONGOING FEES

    Low Rate Home Loan - Prime (Principal and Interest) (Owner Occupied) (LVR < 95%)

    • Low rate home loan with added benefits, add offset for 0.10%
    • Save thousands & make an environmentally conscious choice on your loan for homes less than 12 months old
    • Get a 7.0 star NatHERS rating or higher for up to 1.79% discount on your variable rate home loan T&Cs apply
    Fixed
    More details
    BORROW UP TO 95% OF PROPERTY VALUE
    BORROW UP TO 95% OF PROPERTY VALUE

    Fixed Rate Home Loan (Principal and Interest) 3 Years (LVR ≤ 80%)

      Variable
      More details
      100% FULL OFFSET ACCOUNT
      100% FULL OFFSET ACCOUNT

      Offset Package Home Loan (Principal and Interest) (LVR 70%-80%)

        Fixed
        More details

        Fixed Options Home Loan (Principal and Interest) 2 Years (LVR < 70%)

          Fixed
          More details

          Breakfree Package Fixed Rate Home Loan (Principal and Interest) 3 Years (LVR < 80%)

            Variable
            More details
            FREE REDRAW FACILITY
            FREE REDRAW FACILITY

            Basic Flyer Home Loan (Principal and Interest) (LVR 70%-80%)

              Variable
              More details

              Smart Home Loan (Principal and Interest) (LVR < 80%)

                Variable
                More details
                GREAT FLEXIBLE LOAN OPTIONS
                GREAT FLEXIBLE LOAN OPTIONS

                Basic Home Loan (Principal and Interest) (LVR 70%-80%)

                  Fixed
                  More details

                  Premier Package Fixed Options Home Loan (Principal and Interest) 2 Years (LVR < 70%)

                    Variable
                    More details
                    LIMITED TIME OFFER
                    • Fast turnaround times, can meet 30-day settlement
                    • No ongoing or monthly fees, add offset for 0.10%
                    • Extra repayments + redraw services
                    LIMITED TIME OFFER

                    Smart Booster Home Loan Discounted Variable - 1yr

                    • Fast turnaround times, can meet 30-day settlement
                    • No ongoing or monthly fees, add offset for 0.10%
                    • Extra repayments + redraw services

                    Base criteria of: a $400,000 loan amount, variable, fixed, principal and interest (P&I) home loans with an LVR (loan-to-value) ratio of at least 80%. However, the ‘Compare Home Loans’ table allows for calculations to be made on variables as selected and input by the user. All products will list the LVR with the product and rate which are clearly published on the Product Provider’s web site. Monthly repayments, once the base criteria are altered by the user, will be based on the selected products’ advertised rates and determined by the loan amount, repayment type, loan term and LVR as input by the user/you. *The Comparison rate is based on a $150,000 loan over 25 years. Warning: this comparison rate is true only for this example and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate. Rates correct as of May 29, 2022. View disclaimer.

                     

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