How much money can you borrow?

When you speak to your broker, you’ll receive an estimate of your ‘borrowing capacity’, which is the maximum amount of money a bank will lend you. Later, during the home loan application process, you’ll receive formal confirmation of your borrowing capacity.

Lenders look at three key areas when calculating your borrowing capacity:

1. Income

Lenders want to know how much money you're likely to earn in a typical month. If you have a standard PAYG job, the lender will probably expect you to have held the role for at least six months, so your probation period is behind you. If you're self-employed, the lender will probably request additional documentation to verify your income.

2. Expenses and debts

Lenders want to know how much money you're likely to spend in a typical month. They'll ask for bank and credit card statements, so they can see your spending habits and any loan repayments. Reducing your expenses and paying off debts should help you increase your borrowing capacity.

3. Dependants

Lenders also want to know how many people you're financially supporting – such as children and elderly parents – as this will affect how much money you can devote to monthly mortgage repayments.

Remember every lender uses different assessment criteria, it’s always handy to have a mortgage broker to guide you through your home loan application.