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Borrowing Power Calculator | How Much Can I Borrow?
Borrowing Power Calculator | How Much Can I Borrow?
Written by
Tina Sendin
Edited by
Andrew Kemp
Reviewed by
Sam HymanCompare home loans the easy way
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Long story short
Borrowing power is an estimate of how much lenders think you can responsibly borrow
It’s based on your income, expenses, liabilities, and other financial factors.
A 20% deposit often saves you from lenders mortgage insurance (LMI)
A higher deposit usually means less borrowing, lower rates, and potentially better deals.
You can boost your borrowing power by paying debt, saving more, and budgeting better
Cutting unnecessary spending and reducing credit card limits can increase your borrowing capacity.
How much can I borrow?
Check out our borrowing power calculator below to get an idea of how much you might be able to borrow.
What is borrowing power?
Your borrowing power is the amount a lender thinks you can responsibly borrow for a home loan, based on your financial capacity. The keyword here is ‘responsibly.’
It’s an estimate of the maximum amount the lender thinks you can repay without stretching yourself too thin. It’s also the max amount they’re likely to lend you.
To determine your borrowing capacity, lenders assess serviceability as part of a broader credit assessment. They assess various things like your income, expenses, and debts against the property value and amount you want to borrow. The better you manage your money, the more borrowing power you may have to snag that dream home.
Here’s a video explaining a bit more about borrowing power.
Think of your borrowing power as your financial fitness level: Can you handle borrowing without breaking a sweat?
If your income is strong, your expenses are under control, and you’re not weighed down by debts, your borrowing power is likely to be in great shape.
If you’re juggling credit card debt or spending more than you earn, it’s like trying to run a marathon without training – you’re not going to get very far. You might be forced to bail before even reaching the finish line.
How is borrowing power calculated?
When you use the iSelect borrowing power calculator, you can see how your cash flow and income, expenses, dependents, and credit history might influence your final loan amount. First you’ll need to pop in your income, expenses, and debts. Then it’ll crunch the numbers to show the max amount you could borrow and what your repayments might look like – whether it’s weekly, fortnightly, or monthly.
If you want the most accurate idea of how much you can borrow, you’ll need to make sure the details you provide are spot on.
To give you an idea of how lenders work out your borrowing capacity before giving that golden credit approval, here are the things they typically look at.
Income
Income is basically the cash coming into your bank account, like your monthly salary – whether it’s just yours or combined with your partner’s. It can also include extra perks like rental income, share dividends or other money-making side gigs. Be warned though: You could be earning six figures, but if you’ve got sky-high expenses or debts nibbling away at your cash, your borrowing power could take a hit. Lenders don’t just see the dollar sign – they want to know how much of it you’re actually keeping after life’s essentials and indulgences.
Expenses
Speaking of indulgences, those daily lattes and weekend splurges count here! Lenders go through your fixed costs (like rent, groceries, or car payments) and also your discretionary spending (like takeouts and streaming subscriptions) to figure out what’s left for loan repayments.
Loan details
The loan amount (the dollar figure you want to borrow), the time you want to take to pay it back (your loan term), and the type of loan can all come into play. Longer loans might mean smaller repayments, but you’ll pay more interest over time. Shorter loans may save you on interest but bump up your monthly payments.
Existing debts and assets
Got a car loan hanging over your head? Several credit cards? These can all reduce your borrowing power, since they’re ongoing liabilities in the lenders’ eyes. But if you’ve got assets like an investment property or a stash of savings, they can work in your favour. Assets show lenders you’re doing alright financially but assets alone don’t increase your borrowing power unless they help with your cash flow or can be used as security. They also look at whether you can make your regular repayments religiously.
Living situation and dependents
Whether you’re living alone, raising kids, or just looking after your mate’s pet iguana, your living situation impacts how much of your income is tied up. Dependents could mean more expenses, which could reduce how much you’re able to borrow.
Interest rates
Interest rates can be slippery little suckers. Higher rates mean higher repayments, shrinking how much you can comfortably borrow. On the flip side, lower interest rates give you a bit more breathing room. This is why comparing rates from different lenders is so important. Keep in mind that your ability to make your home loan repayments is assessed using lender assessment rates, not the advertised interest rate.
Deposit
Your deposit is your up-front money, and it plays a huge role. A bigger deposit lowers the amount you need to borrow and could even score you a better deal on interest rates. Plus, the more skin you have in the game, the more confident lenders may feel that you’ll keep up with repayments.
Helpful tip
If you’re in the market for a new home, one of the first steps in the process is finding out how much you could borrow. Using a handy calculator, like iSelect’s, is a great way to get a feel for how much you may be able to borrow from a lender based on your household salary and expenses. This can help you get an idea of how much money you’ll need to set aside for a deposit, as well as for stamp duty.
Nicole Jacobs
Co-Founder and Managing Director, WHITEFOX Advocacy
How do I increase my borrowing power?
If the borrowing power calculator gives you a number that feels a bit underwhelming, don’t give up. There are ways to push that number up.
Track and tame your spending
Every dollar counts. You can start by tracking your living expenses –both essential and discretionary (think subscriptions, subscriptions, and, you guessed it, more subscriptions). Have you cancelled the streaming services you don’t use? Do you review your utilities and switch to better deals? If not, you’re practically giving away borrowing power.
Smash down debt
Credit cards, car loans, and buy-now-pay-later like Afterpay are all active debts that can eat into your max borrowing amount. Yep, even with unused credit limits. It’s a great idea to consider lowering your credit limits where you can.
Save a bigger deposit
Most lenders want a 20% deposit to skip lenders mortgage insurance (LMI). When it comes to deposits, more is better. If building up your stash for a new home loan feels like a slog, it might be time to ramp up your savings game, streamline your expenses, or call on the bank of Mum and Dad.
Nail your credit score
Those late payments for mobile phone bills or blips with your electricity provider can affect your credit file, which lenders scrutinise. Plus, A healthy credit score means more borrowing capacity and a better shot at competitive rates.
Check your living situation
Having more dependents could mean you’ve got less to borrow. This is definitely not something you can change overnight, but just as good to factor in when planning for the future (and laying out your homeownership journey).
Heads up!
We have various home loan calculators you can use throughout your home buying journey – things like refinancing and extra repayments calculator. Why don’t you have a go at some of them to determine not just your borrowing power capacity but also how much having additional monthly repayments, increasing your repayment amounts, or even considering to refinance could shave years and interest repayments off your mortgage!
Frequently asked questions
Does equity from another property increase my borrowing power?
Home equity is the difference between what your property’s worth and the amount you still owe on it.
Lenders may see it as a safety net, so they’re likely to consider you as less risky. You might even be able to use that equity as security in place of a deposit for your next property.
But keep in mind that while equity from another property can help with security or deposit requirements, it does not automatically increase borrowing power.
How much does HECS-HELP affect borrowing power?
Banks used to treat HECS debt like a personal loan, which typically cuts down how much you can borrow. But now, if your HECS debt is nearly paid off, some banks will ignore that debt when working out how much you can borrow. This could boost your borrowing power by tens of thousands, depending on your income and situation.
For first-time home buyers, it might mean bigger loans or finally getting that approval.
That said, there’s a catch. Not all banks will do this – it depends on the lender and how much HECS you’ve got left.
Most lenders will only ignore your HECS debt if it’s due to be cleared within the next 12–24 months. And some lenders might not factor out HECS debt at all. So, it’s a good idea to chat with a broker so you can find a HECS-friendly lender and get the most out of your borrowing power.
Should I get pre-approval to understand my borrowing power?
Pre-approval is a conditional indication from a lender that they are likely to approve you for a home loan of a particular amount. Pre-approval offers are usually valid for 3–6 months, giving you time to find a dream home within a realistic budget.
Heads up: It’s possible for your pre-approval application to be rejected. Things can go sideways if events like the following happen:
- there are changes to your personal circumstances (e.g. unemployment)
- lending policies change
- your credit score isn’t up to the lender’s standard
- you didn’t provide enough documentation
- your application has a high loan-to-value ratio (LVR).
Pre-approvals are usually a conditional indication from a lender and may involve a credit enquiry on your credit file, depending on the lender and the type of pre-approval. To avoid being perceived as a higher financial risk, it’s generally a good idea to avoid applying for multiple pre-approvals and wait until you’re serious about buying a home.
How do I compare home loans?
Feeling a bit more confident about your borrowing power? Then it might be time to look for home loan options. We’ve partnered with Aussie Home Loans to help you compare a range of lenders and home loan products in Australia. Start a comparison.
Get started on comparing home loans today!
Find a home loan by comparing with iSelect’s trusted partner, Aussie.
iSelect is the trading name of iSelect Mortgages Pty Ltd (ABN 86 148 217 181). iSelect Mortgages Pty Ltd is a credit representative (Credit Representative 400540) of Lendi Group Distribution Pty Ltd (Australian Credit Licence 246786). iSelect provides a referral to Lendi Group Pty Ltd, a Credit Representative of Lendi Group Distribution Pty Ltd (Australian Credit License 246786). iSelect Mortgages Pty Ltd receives a commission from Lendi Group Distribution Pty Ltd, the licensee for each new customer account created and for each home loan submitted through this service.