Man Applying for home loan approval Man Applying for home loan approval
Man Applying for home loan approval

When you’re planning on buying a property in Australia, one of the most common questions home buyers have is “how much can I borrow?”

Mortgage lenders calculate borrowing power based on a number of factors. This will determine the types of properties you can buy and what your mortgage repayments will be.

Read this breakdown of what affects how much you can borrow for property in Australia and talk to our home loan specialists for advice and a free property evaluation.

What affects how much I can borrow for property?

In some cases, banks and other mortgage lenders will lend up to 95% of the value of property. However a good rule of thumb is to only borrow 80% of the total property value. How much you can borrow for a home loan depends on many factors, including:

Annual income

How much you earn is a guide to lenders about how much you can afford to pay back on a mortgage every month. The higher your income, the more likely you are to be approved for a home loan and the greater your borrowing power is likely to be, though this will be balanced against your expenses.

When entering your income in a home loan calculator, make sure you include all regular sources of income before tax, including your net salary, self-employment income, income from rental property and any other income streams.

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Monthly expenses

Lenders will balance your monthly outgoings against your income to determine what you are able to afford for mortgage repayments. Even if you’re a high income earner, you may not be approved for the loan you want if you have a lot of outgoings.

When adding up your expenses or using a borrowing power calculator, you should account for day-to-day living expenses, regular payments such as bills and insurance, any existing loan repayments and all other financial commitments.


Along with your income and expenses, how much you pay down as a deposit is the other main factor that determines how much you can borrow for a mortgage.

The minimum deposit for most property is between 5% and 10% of its value, but the more you’re able to pay upfront, the less you’ll need to borrow. If you can pay a deposit of 20% or more, you won’t have to pay for Lenders Mortgage Insurance or a Low Deposit Premium.

When you’re calculating how much you can afford to pay as a deposit, keep in mind other costs of borrowing and buying a property that you may need to cover, such as legal fees, stamp duty and insurance.

Loan term and interest

The type of home loan you apply for will also affect your repayments and your borrowing capacity. A low interest rate mortgage or a longer repayment period will mean a lower monthly expense, though you could be paying more for your loan in the long term.

If you’re using a home loan calculator to estimate your repayments or how much to borrow for a mortgage, keep in mind that the examples given will be based on a fixed interest rate across the loan term, when the real interest rate may vary.

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Savings and credit cards

If you have a savings account that you make regular deposits into, this will help demonstrate your financial security to mortgage lenders and your ability to make repayments.

However, if you have credit cards, these could be counted as debt against you, even if they are always paid off in full. Cancelling credit cards you don’t use or reducing your credit limit on current cards can improve your borrowing power.

Credit rating

Home loan providers will check your credit report to see whether you have a good history of making repayments or if there are any red flags such as missed payments or defaults that could make you a risky borrower.

You can request a free copy of your own credit report from reporting agencies to see if there are any areas to improve or errors that could be impacting on your borrowing power. Here at Fox Home Loans, we provide a free credit report when you enquire for your next mortgage.

Property value

Some lenders will also consider the property you’re planning to buy and arrange a valuation to determine the loan amount.


If your circumstances mean you are not able to obtain a suitable mortgage on your own, you may be able to borrow what you need by using a guarantor for the loan. This is someone who agrees to take responsibility if you fail to make the agreed repayments on your home loan.

What benefits are available for first home buyers?

If it’s your first time buying a home in Australia, you may be eligible for support through the First Home Owner Grant. This government scheme provides a one-time payment towards your home loan, usually paid at the time of property settlement.

The amount and eligibility criteria for the grant vary depending on your region. You can find out more by talking to your mortgage Lending Specialist, or on the First Home Owner Grant website.


How much will my mortgage repayments be?

How much you pay for your mortgage each month will depend on the value of the property and the term and interest rate you agree with your mortgage lender.

You should only agree to repayments you can comfortably afford. If you can afford to pay more each month, this will mean the loan is paid off earlier, with less interest paid overall.

Fox Home Loans will help you to compare your loan options and calculate your repayments.

Can I increase how much I can borrow?

Mortgage lenders will determine your borrowing capacity based on what they think you can comfortably afford, but this calculation can vary from lender to lender.

It’s not recommended to take on more debt than you can afford to, but you can improve your chances of being approved for the loan amount you want by:

  • Increasing your income
  • Reducing your monthly expenses
  • Saving up for a larger deposit
  • Paying off your debts
  • Checking your credit report for errors or areas to improve
  • Closing unused credit cards or reducing excess credit limits
  • Talking to a mortgage advisor who can help you find the best deal

Still not sure where to start? Why not contact your local mortgage broker at Fox Home Loans, who can help you understand your borrowing power and arrange a no obligation home loan pre-approval?