Factors that determine your borrowing amount
The amount you can borrow to buy a property is determined by a number of factors, including:
- Your income and commitments
- Your lifestyle and living expenses
- Your property
- Your loan interest rate, the term and type
- Any assets you offer as security (for example, another property)
- The value of your property
- Your credit history.
Check your borrowing power now or read more about how each of these can affect your home loan.
Your income and commitments
Before going ahead with a home loan, it’s important to assess how much you can afford in repayments. If you’re applying for the home loan jointly with another person, your repayment capacity may be greater, which can mean greater borrowing power.
Your commitment level takes into account all debts currently outstanding, including credit and store cards, personal loans, and car hire purchase or lease agreements, and any other ongoing payment commitments.
Your lifestyle and living expenses
You'll need to take a close look at your living expenses, to ensure you can realistically afford the repayments and maintain a standard of living you are comfortable with.
The amount you can borrow depends on the value of your property. This value is determined by your lender, and is not necessarily the advertised or purchase price of a property.
Your home loan interest rate, the term and type
The amount you can borrow may also depend on the interest rate and the term of your home loan. The lower the interest rate, the lower your repayments will be. A longer-term home loan will mean lower repayments, but a shorter-term loan may save you interest. You need to think carefully about what is most important to you.
Your credit history
Your credit history is also very important and will be checked by a lender when assessing your home loan application. It takes into account your previous record of repaying loans and credit cards.
If you’re unsure about your credit history, it’s worth checking before applying for a loan. From there, you can take steps to improve or correct it if necessary – for example, by clearing an unpaid debt.
For a free copy of your credit reference report, you can contact Equifax. If you choose to receive an immediate email report on your credit rating, a fee applies.
Talk to us about buying a home
The information on our website is prepared without knowing your personal financial circumstances. Before you act on this general information, please consider if it’s right for you. If you need help, call 13 33 30.