Home Loan Borrowing Calculator

Working out how much you could borrow to buy a home can be tricky, as there are multiple factors that lenders consider during the home loan approval process.

This calculator could help you to estimate how much money you could potentially borrow in the form of a mortgage (home loan).It takes into account your income and expenses, along with the interest rate and the term (length) of the loan. It’s only an estimate because different lenders have different criteria when assessing whether or not to lend someone funds to buy a house. However, it may give you some insight into whether or not the amount you were thinking of borrowing could be within the range of what you can afford. The information could be used as a starting point in discussions with your lender or broker, who would be able to give you information about what their loan approval conditions are for prospective clients.

The results can be displayed in a graph or a table, showing total loan costs, repayments and how much of the principal of the property you would be paying off over time (providing you choose a principal and interest loan, rather than an interest-only loan).

Your borrowing power is the amount of money you may be able to borrow from a lender. It is based on your financial situation, including how much you earn, your expenses, your existing debts and the size of your deposit. Other factors like your credit score and whether you have a guarantor can also play a role.

You can use Canstar’s Home Loan Borrowing Power Calculator to estimate your borrowing power. This is based on your income and expenses as well as the home loan interest rate and loan term you select.

You can click the “Assumptions” button to change the calculator’s default assumptions about your expenses. Bear in mind that the calculator should be used as a general guide only, as it does not factor in potential changes to your income or expenses that may occur over time.

There are a range of factors that can affect your borrowing power, including your income, your expenses, your existing debts, your deposit and your credit score.

• Your credit score

Your credit score is based on your personal and financial information, including what credit and loan products you have and your repayment history. If you have a high credit score, this could increase your borrowing power. You can find out more about how your credit score could affect your ability to get a home loan.

• Your income

Lenders look at your income to help work out how much you could afford to repay. As a general rule, the more income you earn compared to your expenses, the greater your borrowing power may be.

• Your assets

Having existing assets, such as a car, investment properties or shares, may improve your borrowing power as it may demonstrate your ability to save and invest over time. That said, if you have other loans over those assets, such as a car loan or investment home loan, this could reduce your borrowing power.

• Your expenses

This includes things like rent, utility bills and how much you spend on groceries. If you have children or other dependents, your lender will also factor this in. If your expenses are high compared to your income, this will generally lower your borrowing power.

• Your spending habits

Some lenders may look closely at your spending habits to see whether you can afford to meet loan repayments. This may include scrutinising what you spend your money on, such as takeaway orders, online betting and streaming subscriptions, and how you pay for those items or services, such as whether you take money out of your savings or use smaller loans or buy now, pay later schemes. The more careful you are with how and what you spend your money on, the greater your borrowing power may be.

• Your existing debts

Any debts you have (such as credit cards and personal loans) can also affect your borrowing power. Lenders will typically take into account the maximum credit limit on any credit card, even if you don’t use all of it. If you have a lot of debt or high credit limits, this may lower your borrowing power.

• Your deposit

The bigger your deposit is, the better your borrowing power typically is. Lenders will look at the size of your deposit in comparison to the property you want to buy. This is known as the loan-to-value-ratio (LVR). Bear in mind that if you have less than a 20% deposit, you will typically need to pay lender’s mortgage insurance (LMI).

Lenders will also look at your savings history. If you can show a history of genuine savings over time, this can help you demonstrate that you can make future home loan repayments.

• If you are applying for a home loan by yourself or with others

If you apply for a home loan with a partner, friend or relative, you and that person’s credit history and financial situation will both be put under the microscope by lenders. With that in mind, it may be a good idea to do a full assessment of both your finances, seeking professional advice if you need it. If you find that your partner, friend or relative’s credit or debt issues may affect your borrowing power, you may want to discuss it with them and consider applying for the loan by yourself.

When taking on a mortgage in Australia, there is no simple formula that can be used to work out how much you can borrow compared to your wage. That’s because your salary is just one of many factors Australian lenders will consider when working out your borrowing power. Lenders will look at your broader financial situation, including your expenses, other debts like credit cards and how much you have saved for a deposit.

If you are interested in how you might appear to a lender, you could find out your credit score, along with using the calculator on this page to estimate your borrowing power. Your credit score could be used as one indication of the likelihood of you being approved for a loan.

There are some other countries that do refer to borrowing power as a multiple of a wage, but this is not typically the practice in Australia when it comes to the loan approval process.

Check your credit score for free

If you’ve calculated your borrowing power and it’s not as high as you’d like, there are some steps you can take that may help increase it:

• Pay down debts – if you have existing debts like credit cards and personal loans, try to pay these down as much as you can before applying for a home loan. If you have any credit cards that you don’t use, consider paying them off in full and then cancelling them. Bear in mind that cancelling a credit card could negatively affect your credit score in some cases, such as if you’ve only had it for a short period and are transferring your balance onto another credit card.
• Reduce your credit limit – lenders consider your maximum credit limit, so you may want to lower this if you can.
• Cut down expenses – take a look at your spending and see if there is anywhere you could cut back costs. You might also like to compare electricity, gas and internet prices to see if you can get a better deal for your circumstances.
• Build up a good savings history – try to develop evidence of a regular savings history before you apply for a home loan. This can help show that you are disciplined enough to meet future loan repayments.
• Check your credit score – it’s a good idea to check your credit score regularly, so you know where you stand as a borrower. You can check your credit score for free with Canstar. You might also like to read our steps to help improve your credit score, such as paying your bills on time and checking your credit report for errors.

Other ways to potentially increase your borrowing power include borrowing with someone else (such as a partner) if they have a good credit history, getting a family member to go guarantor on the home loan and taking out a home loan with a longer term. However, you should carefully weigh up the pros and cons of these options. For example, a longer home loan term will reduce your repayments and hence may increase your borrowing power, but it also means you’ll pay more interest over the life of the loan. Similarly, different loan types, such as interest-only home loans, can also influence the amount of interest you pay over the life of a loan.

If you are a first-home buyer, you may be able to access the First Home Guarantee scheme (formerly known as the First Home Loan Deposit Scheme), and be eligible for the First Home Owner Grant (FHOG). You may also be interested in our guide on how to apply for a home loan.

There is no simple answer to this question, as there are many factors at play. How much deposit you need depends such things as:

• How much you can afford to borrow
• What property you want to buy
• What type of loan you want to take on
• What other fees and costs you will need to pay on top of your deposit

As a general rule, the bigger the deposit you can save up compared to the loan you take out, the more you will save in interest.

Explore: How much do you really need for a home loan deposit?

Canstar has a range of other calculators available that could help you to plan your finances.

If you want to estimate what your likely repayments would be for a particular loan amount, interest rate and term, you could use Canstar’s Mortgage Repayment Calculator.

→ Mortgage Repayment Calculator

Canstar’s Stamp Duty Calculator may help you to work out how much tax you may be required to pay if you plan on buying a home, depending on the purchase price of the property, where it is located and your own circumstances.

 → Stamp Duty Calculator

If you are weighing up a couple of different home loan options, the Home Loan Comparison Calculator may help.

→ Home Loan Comparison Calculator

You may be considering a split loan – which is where part of the loan is set for repayments on a fixed-loan basis, and the rest is on a variable rate. In this case, our Split Loan Calculator may be of assistance.

→ Split Home Loan Calculator

If you are considering ways to speed up the repayment of your loan, you may consider using Canstar’s Extra Home Loan Repayments Calculator.

→ Extra Home Loan Repayments Calculator