How much should I borrow?

You should only borrow an amount that you feel comfortable that you can meet the repayments. With so many lenders in the market and their different lending policies, you may be surprised at just how much some institutions will lend to you.

To determine how much you can borrow, over the phone or in person, a Mortgage Australia Broker can quickly show you how much the more generous lenders will allow you to borrow. A simple calculator that will give you a good indication is here .

The general factors that are taken into account when determining how much someone can borrow are:

Net income
  • How much do you clear?
  • Will you have one salary or two?
  • Do you have other sources of income?
Stability of income
  • Are you in full-time work?
  • How long have you been with your employer?
  • Are you self-employed?
Other loan repayments
  • Do you have a car loan? HECS debt? Credit card debt?
Total credit card limit
  •  A high limit can decrease your borrowing capacity
Credit history
  • A bad credit history won't help - but it can’t be hidden

Number of dependants

  • Do you have children that live with you?

Term of the loan

  • Are you taking out a 15-year or 30-year loan?

Interest rate

  • When rates are higher, your borrowing capacity will be lower

Debt-service ratios

  • In determining your borrowing limit, Lenders use what is called the debt-service ratio - the ratio of loan repayments to your gross income. For single income earners, this ratio should not exceed 35%. For double income earners, the ratio should not exceed 40%.

What you should take into account

  • The Lender's main concern in determining how much you can borrow is "Can they repay the loan?" They may not take into account a host of other personal matters - but you should. These include:
  • Income security- You know more than the Lender about the security of your income. How safe is your job?
  • Family planning - You might not have children now, but are you planning to? And if so, will this mean going from two salaries down to one?
  • Job satisfaction - If you have a highly paid job, you can borrow more. But, if you don't like your job, or it's highly stressful, taking out a large Mortgage can have long-term lifestyle implications.
  • Lifestyle- You might be able to afford to service a large loan, but only if you have no social life whatosever. You need to consider whether that's a trade-off you're happy to make.
  • Other goals - Property ownership has become a preoccupation for Australians. But, there are other financial goals to consider - like providing for your retirement. And money isn't everything. Will taking out a large Mortgage mean you'll never fulfil your dreams?


That's why the question should not be 'How much can I borrow?' but 'How much should I borrow?' And only you can ultimately make that decision. To learn more, talk to Mortgage Australia today.