One of the first questions every first home buyer asks is, “How much can I borrow?” It sounds simple — but the answer depends on far more than your income. Understanding how lenders assess borrowing capacity can mean the difference between buying confidently or facing disappointment down the track. The more accurately you calculate your borrowing potential, the better you can plan, save, and negotiate when the right home appears.
What Lenders Look At
When you apply for a home loan, banks and lenders use detailed serviceability calculations to decide how much they’re willing to lend. These formulas take into account your income, existing debts, living expenses, credit score, and loan type. They also apply what’s known as a serviceability buffer — usually around 3% — to ensure you could still afford repayments if interest rates rise.
For example, if the current rate is 6%, the bank will test your finances at 9%. This built-in safety margin protects both you and the lender. It’s why your estimated borrowing capacity might differ between banks, even if your financial situation stays the same. Each lender has its own approach to assessing risk and affordability, which is why professional advice is so valuable.
Why Online Calculators Can Mislead You
Many first home buyers start with free online borrowing calculators. While these tools are convenient, they can be misleading because they don’t reflect the specific policies used by different lenders. A calculator might give you a ballpark figure — but it often ignores important variables like overtime income, bonuses, rental income, or different household expense benchmarks.
For instance, one bank may accept 100% of your overtime as income, while another might only consider 50%. Similarly, some lenders use higher default living expense estimates, which can significantly reduce your borrowing limit. To avoid surprises later, treat online results as a guide, not a guarantee.
How to Improve Your Borrowing Power
The good news is that your borrowing capacity isn’t fixed. You can actively improve it by tightening your financial habits and managing your liabilities effectively. Reducing personal loans or credit card balances, consolidating debts, and trimming recurring expenses all make a measurable difference.
Even small changes can have a big impact — for example, cutting $200 a month in regular outgoings can increase your borrowing capacity by tens of thousands. Other smart steps include paying off buy-now-pay-later accounts, avoiding new credit inquiries, and maintaining consistent savings patterns to demonstrate financial discipline. For ongoing finance and money-management tips, visit SteveMitchell.au.
Get a Broker’s Assessment
To get a truly accurate figure, it pays to work with a professional mortgage broker. A broker uses real lender algorithms and policy knowledge — not generic calculators — to determine exactly how much you can borrow across multiple banks. They’ll also highlight which lenders are most flexible given your unique circumstances and goals.
In addition to calculating borrowing power, a broker can guide you through strategies to strengthen your application, such as adjusting your loan structure or timing your purchase strategically. For insights into how loan structuring works, explore CDRTA.au or read about property finance insights on CraigDangar.com.au.
Don’t Gamble Your Home Dreams on Guesswork
Buying your first home should be exciting — not stressful. Get the clarity you need before you start house-hunting. Contact Chase today for a free, accurate borrowing capacity assessment tailored to your goals. With expert guidance, you can make confident, informed decisions and move toward homeownership sooner.
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