What affects my borrowing power?
Your borrowing power is how much a lender is willing to loan you for a home. It’s based on your income, expenses, and overall financial situation. Here’s a quick look at what influences it most:
Income
The more you earn, the more you can usually borrow, especially if your income is stable. This includes:
- Wages or salary
- Bonuses or commissions
- Rental or business income
- Government benefits (in some cases)
Lenders love consistency, so a steady income history works in your favour.
Expenses
Lenders look closely at your day-to-day spending. They’ll want to know what you spend on:
- Rent or existing loan repayments
- Groceries and utilities
- Subscriptions, childcare, transport
- Anything else that affects your monthly budget
Lower expenses = higher borrowing power.
Debts
Any current debts will reduce how much you can borrow. This includes:
- Credit cards (even if you don’t use them)
- Car or personal loans
- Buy now, pay later accounts
- Student loans (like HELP or HECS)
Even a $10,000 credit card limit can cut your borrowing power by thousands.
Dependents
If you support kids or other dependents, lenders factor in higher living costs, which can lower your borrowing capacity.
Deposit size
A bigger deposit reduces your loan amount and risk to the bank. With at least 20%, you might avoid lenders mortgage insurance (LMI), too (which can mean thousands saved and more borrowing power).
Interest rates and loan term
Higher rates mean higher repayments, which lowers borrowing power. A longer loan term (like 30 years) can help reduce monthly repayments, allowing you to borrow a bit more.
Employment
Full-time, stable jobs are ideal. If you’re self-employed or working casually, you may need to show a longer track record of income to get the same borrowing capacity.
Credit score
Your
credit score shows lenders how well you manage debt. A good score can help you borrow more and access better interest rates. A poor score might reduce your options.
Where do I go from here?
Once you’ve used our buying power calculator, the next steps are just as important. Here’s what you should do next to move confidently toward home ownership.
1. Get pre-approved: An Acceptance Finance broker will organise a pre-approval with a suitable lender, giving you a clear idea of your budget and helping you approach the market with confidence.
2. Understand the full costs: Beyond the purchase price, there are other costs to consider. Our brokers will help you budget for stamp duty, legal fees, LMI, inspections, and more so you’re fully prepared.
3. Compare loan options that fit your goals: From fixed vs variable rates to offset accounts and flexible repayments, we will explain the options and find a loan that aligns with your financial situation.
4. Identify eligible grants and incentives: If you’re a first home buyer, you may be eligible for state-based schemes or government support. Our experienced brokers will check what you qualify for and help with the application process.
5. Create a clear action plan: Whether you’re ready to buy now or working towards your deposit, let an Acceptance Finance broker help you build a step-by-step strategy to reach your goal smoother and sooner.
Borrowing power FAQs
Is borrowing power the same at every bank?
No. Each lender uses different criteria and tools, so your borrowing power may vary significantly from one bank to another.
Does a higher deposit affect how much I can borrow?
Not directly—but it can improve your loan options. A bigger deposit means you’re borrowing less relative to the property’s value, which lowers your loan-to-value ratio (LVR). That may help you avoid lenders mortgage insurance (LMI), qualify for better rates, and improve your approval chances.
Does having a credit card lower my borrowing power?
Yes. Even if you don’t use your credit card, the credit limit counts as potential debt. For example, a $10,000 limit can reduce your borrowing power by as much as $30,000.
Can I borrow more if I have no debt?
Generally, yes. A clean financial slate often results in higher borrowing capacity, though lenders still assess income stability and living expenses.
How do lenders calculate borrowing power?
Lenders evaluate your income, regular expenses, existing liabilities, and apply a stress test using a higher interest rate to ensure you can handle future rate increases.
