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1

1
Your situation

Who is the loan for?

What is the property for?

Number of dependents?

2

2
Your earnings

Your income before tax

$

+ I have additional sources of income

e.g. bonus, overtime, dividends

3

3
Your expenses

How do you want to enter your expenses?

Enter my expenses manually

Please enter your expenses below. To have your expenses estimated automatically, please switch the above on.

My bills and living expenses (monthly)

$

+ Combined total of credit card limits

+ Current home loan repayments

+ Other loan repayments

(e.g. car loan, personal loan)

The result provided is an estimate only. Please read our for more information.

Calculator Assumptions and Disclaimers

    To work out how much a lender may choose to lend you, our Borrowing Power Calculator takes the following steps:

  • Add up your total assessable income, including that of your joint borrowing partner (if applicable).
  • Work out your total living expenses. You can manually enter your own expenses, including other home loans, personal loans and credit card credit limits. Alternatively, you can use an automatic estimate of minimum monthly expenses for singles or couples with diferent numbers of dependants, based on the latest Melbourne Institute - Poverty Lines: Australia report (see table).
  • Set aside 15 per cent of your income as a bufer to cover any unforeseen circumstances.
  • Work out how much money is left over in your budget to go towards your monthly mortgage repayments.
  • Calculate your home loan repayments for a 30-year loan and an interest rate of 5.5 per cent. Fixed rates and variable rates are at historical lows, but lenders play it safe and assume they won’t always be. The foor rates used vary between lenders, though 5 or 6 per cent is a common benchmark.
  • Determine the maximum borrowing capacity (loan size) based on your assessable income left over after your total expenses, including loans, credit cards and 15 per cent bufer are factored in.
  • Calculator does not account for upfront or ongoing fees or charges
  • Interest is calculated by monthly compounding. Weekly or fortnightly repayments may result in diferent calculations, afecting your borrowing power.
  • All months are assumed to be equal. In reality, many loans accrue on a daily basis which can lead to varying interest in diferent months.
  • All calculations are estimates; they are not guarantees you’ll be able to borrow a particular amount, and are not pre-qualifcations or pre-approvals for borrowing.
  • Calculations are only accurate for the values entered into the calculator, and assume that these will stay the same for a 30 year loan term. The calculator does not account for changes to interest rates or your cost of living over this time.
  • Remember that this loan amount is just an estimate, and that each lender will look at your fnances slightly diferently when assessing your loan application. Your maximum borrowing amount may vary depending on which bank or mortgage lender you speak to.
  • Default Monthly Household Expenses

  • Based on the latest Melbourne Institute - Poverty Lines: Australia report.
  • Number of dependents (kids I support)Single (It's just me)Joint (There's two of use)
    0$1729$2514
    1$2375$3124
    2$2985$3735
    3$3596$4346
    4$4207$4950
  • Lender serviceability assumptions can change at any time; this will afect how much you can borrow.
  • Interest rates can change at any time. The calculator assumes a foor rate of 5.5 per cent, but you may want to consider a higher percentage if you believe rates may rise even higher in future.
  • This calculator measures loan serviceability, which is only one factor used by lenders when deciding whether to ofer you loan approval. Your credit history, fnancial situation, employment details and what property you are buying may also play a role in determining your eligibility for a home loan product.
  • This calculator is for information purposes only. Any advice is general and has not taken into account your personal circumstances. Read our full disclaimer.

How much can I borrow on a home loan?

The maximum amount you can borrow for a home loan may depend on a wide range of different factors. Every mortgage lender uses different eligibility criteria to assess home loan applications, but some of the common factors that may be considered include your:

  • income
  • expenses
  • assets
  • liabilities
  • credit score
  • deposit

Whether you're applying for your first home loan or refinancing to extend your loan, the more evidence you can provide a lender that you’re a reliable borrower who can make repayments on time, the more money they may be willing to lend you.   

How does a borrowing calculator work?

To work out how much a lender may choose to lend you, our Borrowing Power Calculator takes the following steps: 

  1. Add up your total assessable income, including that of your joint borrowing partner (if applicable).
  2. Work out your total living expenses. You can manually enter your own expenses, including other home loans, personal loans and credit card credit limits. Alternatively, you can use an automatic estimate of minimum monthly expenses for singles or couples with different numbers of dependants, based on the latest Melbourne Institute - Poverty Lines: Australia report (see table).
  3. Set aside 15 per cent of your income as a buffer to cover any unforeseen circumstances.
  4. Work out how much money is left over in your budget to go towards your monthly mortgage repayments.
  5. Calculate your home loan repayments for a 30-year loan and an interest rate of 5.5 per cent. Fixed rates and variable rates are at historical lows, but lenders play it safe and assume they won’t always be. The floor rates used vary between lenders, though 5 or 6 per cent is a common benchmark.
  6. Determine the maximum borrowing capacity (loan size) based on your assessable income left over after your total expenses, including loans, credit cards and 15 per cent buffer are factored in.

Remember that this loan amount is just an estimate, and that each lender will look at your finances slightly differently when assessing your loan application. Your maximum borrowing amount may vary depending on which bank or mortgage lender you speak to.

Default Monthly Household Expenses

Based on the latest Melbourne Institute - Poverty Lines: Australia report

Number of dependents (kids I support)Single (It’s just me)Joint (There’s two of us)
 0$1729$2514
 1$2375$3124
 2$2985$3735
 3$3596$4346
 4$4207$4950

Important borrowing calculator notes

  • All calculations are estimates; they are not guarantees you’ll be able to borrow a particular amount, and are not pre-qualifications or pre-approvals for borrowing.
  • Calculations are only accurate for the values entered into the calculator, and assume that these will stay the same for a 30 year loan term. The calculator does not account for changes to interest rates or your cost of living over this time.
  • Lender serviceability assumptions can change at any time; this will affect how much you can borrow.
  • Interest rates can change at any time. The calculator assumes a floor rate of 5.5 per cent, but you may want to consider a higher percentage if you believe rates may rise even higher in future.
  • This calculator measures loan serviceability, which is only one factor used by lenders when deciding whether to offer you loan approval. Your credit history, financial situation, employment details and what property you are buying may also play a role in determining your eligibility for a home loan product.
  • This calculator is for information purposes only. Any advice is general and has not taken into account your personal circumstances. Read our full disclaimer.

How can I improve my borrowing power?

After using a borrowing power calculator, you may find that you have less borrowing power than you’d like. First home buyers can be particularly vulnerable to shortcomings in their borrowing power, especially when property prices are high.

If you have less borrowing power than you’d like, you may miss out on buying your preferred property, or have to budget for extra expenses such as Lender’s Mortgage Insurance (LMI).

However, support options are available when applying for a mortgage, which may allow you to borrow more, or pay less as a deposit. Most of these options are intended for first home buyers, who my face more hurdles than others when it comes to building their borrowing power.

Some of these options include:

  • Saving a bigger deposit: Not as easy as it sounds, but effective. Keep in mind that many lenders will want your deposit to be made up of genuine savings – in other words, money earned from your job. Gifts, inheritances, lottery wins and similar windfalls may need to be held in a savings account for a minimum length of time before they can be counted towards a deposit.
  • Joint mortgage: Applying for a mortgage with your spouse or partner may allow you to put twice the savings and income towards servicing the home loan, though your joint expenses may also need to be considered.
  • Paying Lender’s Mortgage Insurance (LMI): It’s possible to get a home loan with a smaller deposit of 15 per cent, 10 per cent or 5 per cent of a property’s value, though you’ll need to cover the cost of your lender’s LMI. The smaller your deposit, the more your LMI may cost, but if you can budget for it you may be able to improve your borrowing power. Some lenders may even waive LMI for some borrowers, such as those with 15 per cent deposits.
  • Guarantors: If you have a parent or similarly close relative who owns their home, they may be able to use their equity to guarantee your mortgage application. This means you may be able to apply with a smaller deposit or even no deposit and pay no LMI. Of course, the guarantor will become responsible for your loan if you default on your repayments, so make sure everyone is aware of the risks involved before applying.
  • First Home Loan Deposit Scheme (FHLDS):This federal government program may allow you to apply for a mortgage with just a 5 per cent deposit, with the government effectively serving as your guarantor. Keep in mind that a limited number of places are available in the scheme each year, a limited number of mortgage lenders are participating, and both you and the property you’re purchasing will need to fulfil the scheme’s eligibility criteria.
  • First Home Owners Grants (FHOGs): Offered by state and territory governments, these grants may be able to help boost your home loan deposit. Other incentives may also be available from your state government for first home buyers, such as waived stamp duty.
  • First Home Super Saver (FHSS) scheme: In this scheme, you can make extra contributions to your superannuation fund, and access up to $15,000 of these extra contributions ($30,000 for a couple applying jointly) to use for your first house deposit. 

Can my home loan deposit affect my borrowing power?

Once you have an idea of how much you may be able to borrow to buy a home or investment property, it’s important to also think about how much you can afford to pay as a deposit. Generally, the more money the home buyers can save up as a deposit, the easier it may be to secure a larger new home loan.

Many lenders in Australia will prefer that you pay a minimum home loan deposit of at least 20 per cent of the property value upfront. This is sometimes described as having a loan to value ratio (LVR) of 80 per cent. For example, if you’re planning to buy a property with a valuation of $500,000, you may need a deposit of $100,000 in order to borrow $400,000.

Having a smaller deposit doesn’t mean you can’t get a home loan, though it may be harder to get the lowest interest rates. You may be able to apply for a home loan with a deposit of 10 per cent or even 5 per cent of the property’s value. However, having a deposit lower than 20 per cent means you’ll likely need to pay for a Lenders Mortgage Insurance (LMI) policy. This covers your lender (and not you) against the risk that you’ll default on your monthly repayments (or fortnightly repayments).

Most banks and mortgage lenders pass the cost of LMI on to borrowers – the lower your deposit, the more your LMI may cost. This could add tens of thousands of dollars to your loan’s upfront costs. It’s sometimes possible to add these extra costs onto your mortgage to pay off over your loan term, though the extra interest repayments over time may ultimately cost you more money.

It’s often important to show that most of your home loan deposit is made up of savings from money earned at your job. This savings history can demonstrate your financial responsibility to potential lenders, which may help improve your chances of seeing your mortgage application approved.

What affects my borrowing power for a home loan?

Mortgage lenders may look at more than just your financial situation when assessing your borrowing power. A few other factors that could affect how much you can borrow include:

Credit history

Because a home loan is secured by the value of the property, your credit score may not play as large a role when applying for a mortgage as it may when applying for a personal loan or a credit card. However, your record of borrowing and repaying money can still help a lender get a better idea of your financial responsibility, so borrowers with bad credit may find it harder to successfully apply for a home loan than a borrower with a good credit score.

Outstanding debts (including credit cards and HECS/HELP debt)

If you already owe money on personal loans, car loans or other debts such as education loans, a responsible lender may not be willing to lend you more money that could put you into financial stress. Paying off your outstanding loans may help to boost your borrowing power.

Keep in mind that when it comes to credit cards, a lender may look more closely at your maximum credit limit than your current credit balance. A responsible lender will consider a ‘worst case scenario’ where you are paying interest on a maxed-out credit card limit to determine if you could still afford your mortgage repayments.

Whether or not you’re currently renting

If you can afford rent, surely you could afford a mortgage, right? Unfortunately, lenders may not see it that way. Even if you could afford a mortgage with repayments equal to your current rent, what if interest rates were to rise?

Even if you’re living with family and not currently renting, lenders may still factor ‘notional rent’ into your expenses when calculating your borrowing power to account for the risk that your living situation could change and you may need to start renting soon.

Entertainment spending

When looking at your income and expenses, some lenders may note if you’re regularly spending a significant amount on takeaway food, buy now pay later services like Afterpay,  and more. This may indicate that you’re less than responsible with your money, which may make the lender less willing to lend you a large sum to buy a house.

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Can a borrowing calculator warn you of mortgage stress?

While responsible lenders try to avoid lending you more money than you can comfortably afford to repay, a large mortgage can still put you at risk of mortgage stress. If your interest rates were to rise, your household expenses increased, or your income was reduced, your finances could be stressed and put under pressure.

You can estimate the cost of a mortgage using a home loan repayment calculator, and then estimate if this home loan is likely to put you at risk of financial stress using a mortgage stress calculator.

How does a mortgage calculator work?

A mortgage calculator is an extremely helpful tool when planning to take out a home loan and working out the costs. Although each mortgage calculator you come across may be slightly different, most will help you estimate how much your repayments will be. The calculator will often also show you the difference in repayments if you repay weekly, monthly or fortnightly. 

To calculate these figures, you’ll be asked to enter a few details. These include the amount you plan to borrow, whether you’re an owner-occupier or an investor, the proposed interest rate and the home loan term. It will also often show you the total interest you’ll be charged and the total amount you’ll repay over the life of the loan.  

Understanding how the mortgage calculator works, helps you to use it to see how different loan amounts, interest rates and terms affect your repayments. This can then help you choose a home loan that you can repay comfortably and save on interest costs. The mortgage calculator lets you compare the benefits and costs of home loans from different lenders to help you make a more informed choice. Use a mortgage calculator to help identify which home loan is most suitable for your requirements and financial situation.

How much money can I borrow for a home loan?

Tip: You can use RateCity how much can I borrow calculator to get a quick answer.

How much money you can borrow for a home loan will depend on a number of factors including your employment status, your income (and your partner’s income if you are taking out a joint loan), the size of your deposit, your living expenses and any other debt you might hold, including credit cards. 

A good place to start is to work out how much you can afford to make in monthly repayments, factoring in a buffer of at least 2 – 3 per cent to allow for interest rate rises along the way. You’ll also need to factor in additional costs that come with purchasing a property such as stamp duty, legal fees, building inspections, strata or council fees.

If you are planning on renting the property, you can factor in the expected rental income to help offset the mortgage, but again it’s prudent to add a significant buffer to allow for rental management fees, maintenance costs and short periods of no rental income when tenants move out. It’s also wise to factor in changes in personal circumstances – the typical home loan lasts for around 30 years and a lot can happen between now and then.

How do you calculate how much you could save with a lower rate?

To work out how much you could save, we run the home loan details you’ve provided through our database, and search for similar home loan options that we think would be suitable for you.

We then calculate the costs of these loan options over 15 years (to keep our calculations consistent) and compare them to the cost calculations for your current home loan.

How can I calculate interest on my home loan?

You can calculate the total interest you will pay over the life of your loan by using a mortgage calculator. The calculator will estimate your repayments based on the amount you want to borrow, the interest rate, the length of your loan, whether you are an owner-occupier or an investor and whether you plan to pay ‘principal and interest’ or ‘interest-only’.

If you are buying a new home, the calculator will also help you work out how much you’ll need to pay in stamp duty and other related costs.

Can you borrow the deposit for a home loan?

Most lenders will want the majority of your home loan deposit to be made up of ‘genuine savings’ which is income earned from your job. While a small number of lenders may let you use a personal loan or a credit card to help cover the cost of your deposit, this may potentially cost you more in interest, and put your finances at higher risk.

If you haven’t saved a full deposit, it may be possible to effectively borrow the deposit for a mortgage with the help of a guarantor. This is usually a parent of other family member who guarantees your mortgage with the equity in their own property.

It may also be possible to borrow the money for a home loan deposit from a family member (e.g. the Bank of Mum & Dad) or a friend, provided you draw up a formal legal agreement to pay this money back, showing your mortgage lender that you’re taking responsibility.

This article was reviewed by Head of Content Leigh Stark before it was published as part of RateCity's Fact Check process.