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How much could I borrow?

Frequently Asked Questions

A rule of thumb used by some lenders suggests that your monthly mortgage repayments should sit at around 28% of your monthly income – any more than this and they can begin to get hard to handle. Individual borrowers should always take into account their specific circumstances and outgoings to work out how much they can afford to borrow. Taking this into account, typically you can borrow four to five times your annual salary, however it may help to use a borrowing calculator – or talk to a mortgage broker – for a more accurate estimate, as this does not account for any personal circumstances.
The amount you can borrow depends on a range of factors such as your salary, living expenses, whether you are applying for a joint loan, interest rates, and many other factors. One way of estimating how much you could borrow is to use the eChoice Borrowing Power Calculator.
It is recommended that a house deposit is 20% of the price of the home. When a housing deposit is less than 20%, the buyer will need to foot the bill of Lender’s Mortgage Insurance (LMI), and they may also end up paying a higher interest rate than they would have if they had a larger deposit. Taking this into account, if $50,000 was going to be enough for a 20% housing deposit, the house would need to be $250,000 or less.
When lender’s consider income for a mortgage application, most types of reliable and verifiable income are considered. For example:
  • Fulltime/part time work
  • Self-employment
  • Centrelink benefits
  • Rental income
To avoid incurring extra fees, your home deposit should be 20% of the house price. For example, if you were looking at a $300,000 home, your deposit should be $60,000.
Borrowing more than the purchase price of a house is usually not offered by lenders. However, if you have a guarantor offering additional mortgage security, some lenders may let you borrow more than the price of the house, usually up to a maximum of 110%.
There are many different ways to borrow money. Some of these include:
  • Bank lending (such as through a personal loan, home loan, etc.)
  • Credit card lending
  • Peer-to-peer lending (getting a loan from a family or friend)
  • Payday loan (short term loan, typically less than $2000)
Personal loans generally range from $2,000 to $100,000. However, it is worth keeping in mind that money owed on the loan will count as debt when you apply for a mortgage.
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