Home buying advice - What can I afford to buy?

Before you start on the adventure of looking for your dream home, there are two key questions that need to be answered – what can you afford to borrow, and what can you afford to repay?

Working out your borrowing power helps you to narrow down your property search and lets you picture what the financial commitments of a mortgage will be.

Help me work out... Calculators

How much can I borrow?

If you’re in the market for a new home, chances are one of your key questions is ‘How much can I borrow?’

There’s no single answer because this is one area where lenders – and the different approaches they take – vary widely. Watch this quick video for more.

How much can you borrow?

  • Do your calculations

    Check out our simple borrowing capacity calculator that works out a rough estimate for you.

  • Consider applying for pre-approval

    With home loan pre-approval in place, you can be more confident of your purchase limit and that you really are able to buy. Having a loan pre-approved (typically valid for 3 months) is especially handy at an auction.

  • Know the criteria

    Your borrowing power is typically based on your income, debts, financial commitments, credit history, loan type, employment history, savings, stability of residence and assets.

Let's say your borrowing capacity calculation came back at $350,000.

On a principal and interest loan at a 6% interest rate for 30 years, the repayments will come in at $2,098.43 each month.

If your budget reveals that you're only saving $2,000 per month after all the regular bills and expenses are paid, you should look at where you can make savings, or reduce the amount you're looking to borrow.

What can you afford to repay?

  • Start making a budget

    It’ll help you see what you’re spending, where you can save, and what you could afford to repay every fortnight/month.

    It is important to note that your repayment figure is your guide for how much you should borrow, no matter how much you can afford to borrow.

  • Consider the unexpected

    Factor in potential events such as interest rate rises, work changes or even accidents, and plan for a financial buffer. Ideally you should always have some spare cash to stash away after paying all the bills (including the mortgage).

    As a guide, your mortgage repayments should not exceed 30% of your gross (pre-tax) income.

  • Use this handy calculator

    Quickly work out what your repayments will be on your loan.

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