The amount you can borrow for a home loan will have an impact on the type of properties you look at, as well as the suburbs you consider.

How much you can borrow for a home loan is determined by a number of things.

Here's a breakdown of what might determine how much you can borrow. 

Income and expenses

Your income is a good guide when figuring out how much you can afford to repay on your loan every month. Look at your living expenses and financial commitments to assess how much of your salary you have left over to cover home loan repayments. A sound budget will give you confidence that you won’t be overstretching yourself.

Our Home Loans Repayment Calculator can estimate your repayments on a certain amount over a particular timeframe. Our How Much Can I Borrow? Calculator can give you an estimate of the loan amount.

Deposit savings

The bigger your deposit, the smaller your loan will be and the less interest you’ll have to pay. Ideally, you should save as much as possible before buying a home. The minimum required deposit is 10%, but aim for 20% if possible. If you’re borrowing more than 80%1 of the property value, you’ll need to take out Lenders’ Mortgage Insurance or Low Deposit Premium.

There are some other upfront costs outside the deposit, including legal fees, stamp duty, moving costs and insurances. Make sure to account for these when creating a savings plan.

Saving history and credit rating

Saving for a deposit is a great way to show that you’ll be able to manage home loan repayments. Three months or more is a good demonstration of your saving abilities.

The lender will also look at your credit rating, which is based on your borrowing and repayment history, including how often you’ve shopped around for credit. There are several credit reporting agencies you can use to check your rating online.

Support for first home buyers

The First Home Owner Grant is a government scheme that provides a one-off payment to first home owners. The grant amount, eligibility criteria and payment details of a First Home Owner Grant all vary among the states and territories. The grant is usually paid at the time of property settlement to your home loan lender and applied directly to your home loan.

You can check with your home loan lender when you apply or you can find out specific details for each region at the Federal Government’s First Home Owner Grant website.

Type and length of home loan

The type of home loan and its associated interest rate will affect your borrowing power. The lower the interest rate, the lower your minimum repayments will be. Stretching your loan out over a longer term might mean you can borrow more, but will increase the total amount of interest you will end up paying by the end of the loan period.

The price of the property

As part of your home loan application, the lender may do a valuation of the property to determine how much they are willing to lend.

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    This article is intended to provide general information of an educational nature only. It does not have regard to the financial situation or needs of any reader and must not be relied upon as financial product advice. As this information has been prepared without considering your objectives, financial situation or needs. You should, before acting on this, consider the appropriateness to your circumstances.