Home Loan Borrowing Power Calculator
How much could you potentially borrow for your mortgage? Our home loan borrowing power calculator will show you what a financial institution may lend you, based on your income and expenses.
Please note that the values provided can only be taken as an estimate of the amount to be borrowed and does not take into account specific factors used by individual lenders in determining their own criteria.
Top advertised rates for refinance home loans
The table below displays a snapshot of the lowest variable home loan products on Canstar’s database with links to lenders’ websites available for a loan amount of $350,000 at 80% LVR in NSW, and available for Principal and Interest repayments. The results are sorted by ‘current rate’ (lowest to highest), then by provider name (alphabetically).
Borrowing Power Calculator: How much can I borrow in a home loan?
The CANSTAR Borrowing Power Calculator calculates a hypothetical maximum loan amount that a borrower could apply for, based on the income and expenses entered into the calculator. This is called your borrowing power.
Financial institutions in Australia are legally required to ensure that you have enough dispensable income available to make certain monthly repayments before they can offer you a home loan. How much you can borrow for a home loan depends on various factors such as your income, regular expenses, and number of dependents (children) you have to support.
You can do any number of calculations about your borrowing power for a home loan with the CANSTAR Borrowing Power Calculator. Read on to find out how your borrowing power is affected by different levels of expenses and different terms and conditions on a loan.
How we made our calculations
The calculations we’ve made are based on inputting the following data into our calculator, except where we have specified otherwise:
- Your Income: $1,100/week in a single wage household (average working wage according to ABS, 2015: $1,137/week, which equates to $59,124/year)
- Annual Expenses: $16,500/year (average Australian annual expenses used as default in this calculator)
- Car Loan Repayment: $0/month
- Credit Card Repayment: $200/month (average debt $4,300 according to ASIC credit card debt clock at time of writing, means $58/month interest + roughly $100/month repayment if intending to repay debt)
- Other Expenses: $0/week (assume expenses included above in average Australian annual expenses)
- Home Loan Interest Rate: 89% (average standard variable interest rate on our database at time of writing)
- Home Loan Term: 25 years
- Basic borrowing power based on these figures: $319,000
- Monthly repayment based on these figures: $1,844/month
The Borrowing Power Calculator includes a calculation to ensure that the borrower’s income could withstand the normal increases in variable interest rates over the life of the loan. Our calculator uses an interest rate buffer of 2.0%.
The values provided can only be taken as an estimate of the amount to be borrowed and does not take into account specific factors used by individual lenders in determining their own criteria.
How much you can borrow is dependent on your personal financial situation, which will differ from the figures we have used in this calculation. You should carefully consider your own income and expenses when using our calculator to find out how much you could borrow.
CANSTAR makes no guarantees that your financial institution of choice will offer you a loan of a particular amount, and you should speak with a financial adviser before making any decisions.
Did you know that if you increase your loan term by just 5 years to a 30-year loan term, you could borrow tens of thousands of dollars more?
For example, by increasing your loan term from 25 years to 30 years, you could borrow $21,000 more and make your monthly repayments $42 cheaper. Of course – this can mean that you end up paying more interest over the life of the loan…
|Loan Term||You could borrow||Monthly repayments|
What if I have other loans to repay?
To start with, if you had no other loans or debts to repay apart from your prospective home loan, you might be able to borrow $348,000 on the income and other factors we’ve specified above.
But when you add other loans or debts to the mix, a financial institution offering a home loan will not let you borrow as much on your home loan. Again, this is because they are required to make sure that you do not take on so much debt that you could not afford to repay it.
For example, if you have a car loan with a repayment of $415/month, you may be able to borrow $57,000 less than if you had no debts to repay.
|Expenses||Cost||You could borrow||Home loan repayment|
|Credit card debt only||$200/month||$319,000||$1,844/month|
|Car loan only
($20,000 at avg rate 8.42%)
|$415/month (rounded to $400/month)||$291,000||$1,683/month|
|Other payments only||$1,000/month||$205,000||$1,185/month|
Using our base data input listed above, we can see that changing the interest rate on your loan makes a big difference to how much you can afford to borrow.
If you choose a loan at the minimum variable rate available on our database at the time of writing (for a loan of $350,000), you might be able to borrow $70,000 more than if you choose a loan at the maximum variable rate available.
|Interest Rate||You could borrow||Monthly repayments|
|3.85% (min variable rate)||$352,000||$1,829/month|
|4.89% (average variable rate)||$319,000||$1,844/month|
|6.31% (max variable rate)||$282,000||$1,871/month|
Splitting your home loan between variable and fixed interest rates can also make a great difference to how much you can borrow and what you pay in monthly repayments. Try our Home Loan Split Calculator to see how splitting your home loan between variable and fixed interest rates at different amounts can affect your home loan borrowing power.
Working together: What if I have a partner?
If you have a partner who is also in full-time paid employment at the same average Australian wage, then your borrowing power might more than double.
Of course, with an increased amount borrowed on a home loan comes much larger monthly repayments!
Borrowers should tread very carefully when basing their borrowing power on both partners continuing to earn the same amount. What if the worst should happen and one of you was suddenly unable to work due to being unexpectedly let go, or became seriously sick or injured?
It may be a wise course to base your borrowing power on just one partner’s income, even if it means aiming for a less expensive home in a smaller dwelling or a location further from the city centre. Nobody wants to end up in financial hardship, and a little planning can go a long way towards preventing it.
What if I have kids?
Everyone knows kids make life more expensive, and financial institutions will take this into account when calculating your borrowing power. In our calculator, your annual expenses jump up with your first child, and continue to rise with each additional child.
Having two children could lower your borrowing power by $93,000 if you live in a single wage household.
|No. of dependents||Annual expenses expected||You could borrow|
Having said that, at the time of writing, households with a weekly income of $1,022/week ($2,044/fortnight) are eligible for a part-payment of the government Parenting Payment from Centrelink. This additional income may increase your borrowing power slightly.
More home loan calculators to help you work out your financial position
Use CANSTAR’s home loan calculators when you’re doing your sums about how much you can afford to borrow in a home loan:
- Home Loan Extra Repayments Calculator
- Home Loan Lump Sum Repayment Calculator
- Home Loan Honeymoon Rate Repayment Calculator
- Home Loan Stamp Duty Calculator
- Home Loan Split Calculator (variable/fixed interest split loan interest rate)
- Home Loan Comparison Calculator