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What can you afford to buy

By the time you’re ready to buy your next home, your financial situation is likely to be very different to when you were a first home buyer. You may have a larger family, bigger car, higher income or other investments that will affect how much you can afford to spend on a new home.

You are also likely to have built equity in your current home, either due to extra mortgage repayments you’ve made or an increase in property value. This puts you a few steps ahead of first home buyers, so the factors that determine how much you can borrow are slightly different.

This is the most important factor in determining how much you can borrow on your home loan. Usually, it’s best if your repayments don’t exceed 30% of your after-tax salary. Use our calculators to get a good idea of what your repayments will be once you start making mortgage repayments on your new loan.

If you’re self-employed, you may not have a regular income or payslips, so we’ll look at how your business is performing financially to determine how much you can borrow.

You can either use the equity in your current home as a deposit for your new home, or save a cash deposit like you did the first time around. How much deposit you’ve saved or the equity you have in your home is an important factor in deciding how much you can borrow on a home loan. If you need to borrow more than 80% of the property value, you’ll need Lenders’ Mortgage Insurance.

If you've found your dream home but your funds are tied up in investments or you're waiting to sell your existing property, a Deposit Guarantee may be just what you need.

Your history of mortgage repayments and other debts are also taken into consideration when you apply for a home loan. Consider consolidating and paying off other debts, so you can focus on making additional repayments on your mortgage, to increase the equity in your current home.

Next article: Understanding the costs

Get conditional pre-approval

Get conditional pre-approval so you know how much you can afford to borrow on your next home loan.

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Important information

Applications for finance are subject to the Bank’s normal credit approval. Full terms and conditions will be included in the loan offer. Bank fees and charges are payable. Provided the details initially agreed upon do not change, a Home Seeker loan approval guarantees the amount you can borrow, but not your interest rate. If you do not find a property and accept our formal loan offer within 90 days of the conditional pre-approval date, we will need to obtain from you updated financials and confirm that the loan still meets your needs and financial objectives.