If you’re planning to buy a home or invest in property, one of the first (and most important) questions you’ll ask is: “How much can I borrow?” Knowing your borrowing power is a crucial first step. It helps you set a clear budget, narrow down property options, and avoid surprises later in the home loan process.
As mortgage brokers, one of the most common conversations we have with clients is about borrowing capacity and what impacts it. Here’s what you need to know to take the guesswork out of your next move.
What Is Borrowing Power?
Borrowing power is the amount a lender is willing to loan you based on your financial situation. It’s not just about your income, as lenders take a wide range of factors into account when calculating how much you can afford to borrow responsibly.
Key Factors That Affect Your Borrowing Power
- Income
This includes your salary, bonuses, rental income, and other sources of regular income. Higher, stable income generally means you can borrow more. - Living Expenses
Lenders assess your monthly expenses, such as groceries, transport, childcare, insurance, and discretionary spending. - Existing Debts
Credit cards, car loans, personal loans, or buy-now-pay-later accounts reduce your borrowing capacity. Even unused credit card limits can count against you. - Dependents
The number of dependents (children) in your household affects your expenses and therefore your loan affordability. - Loan Term and Interest Rate
A shorter loan term or higher interest rate reduces the amount you can borrow. Lenders also assess your ability to repay at higher interest rates as part of their responsible lending requirements.
Why Online Home Loan Calculators Only Go So Far
While a home loan calculator is a great starting point to estimate your borrowing power, it only provides a rough guide. It doesn’t account for lender-specific policies, credit score impacts, or changes in your financial position.
Every bank and lender uses slightly different formulas and serviceability rules, so two lenders can give you very different answers, even with the exact same numbers.
How a Mortgage Broker Can Help
This is where expert mortgage broker help becomes invaluable. We compare your situation against a wide panel of lenders, not just the big banks, to find the loan amount and structure that works best for you.
We’ll take the time to:
- Run an accurate assessment of your borrowing capacity
- Identify any barriers that could reduce your loan options
- Recommend strategies to boost your borrowing power (e.g. reducing debt or improving credit)
Plan with Confidence
Knowing how much you can borrow helps you house hunt with clarity and confidence. Whether you’re buying your first home, upgrading, or investing, your next step should be to get a clear picture of your finances and we’re here to guide you.
Book a free borrowing power assessment today and let’s explore what’s possible for your next move.