How much can you afford to borrow with your first home loan?

Understanding how much borrowing capacity you have when buying your first home is an essential step for all newcomers to home ownership.

The question of “How much can I borrow?” rears its ugly head for all new home buyers. As daunting as it can be, understanding your borrowing power is important – and essential – for those ready to get their foot in the door with their first home purchase.

Owning property in Australia is a dream for many young professionals and families. Aside from the potential financial benefits of owning a home, being able to call a slice of land your own is one of life’s most coveted accomplishments.


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Financial factors

Figures that figure

Getting help & guidance



Source: One30 Residential Unit Development, Hyde Park, Sydney


Financial factors

Before you start looking for a property – either to live in or as an investment – take a look at your finances from all angles and ask yourself a few important questions:

Understanding where you stand financially and what financial loads may be coming your way in the near future can give you a clearer picture of how large or small your borrowing capacity should realistically be.


Figures that figure

How much you can comfortably afford to borrow comes down to two factors:

  • The size of your deposit. Most lenders require a minimum of 10 per cent of the total property cost. NB: There are options that will allow for nearly 100% LVR borrowing and no LMI to be payable.
  • How much you can afford in mortgage repayments. If you’re seeking to develop an approximate idea of how much you can afford to borrow, we recommend that you check out our borrowing capacity calculator as well as our mortgage stress calculator (which allows you model scenarios to see whether you might be committing to a plan that will put you into mortgage stress).

If you’d like to do some further research for yourself, the Naritas team have published calculators on our site (including our stamp duty calculator and LVR calculator) that should come in handy when it comes to figuring out your LVR and net deposit.

If you’re currently renting a property, your weekly or monthly rental amount is a good indication of the starting figure for your mortgage repayments. This is the bare minimum, however. You will need to add other expenditures to this figure, such as rates, taxes, lenders mortgage insurance (if applicable), among others.

New buyers may also want to consider single or joint income amounts. As a general rule, your mortgage repayments (along with other short and long-term expenses) shouldn’t cost more than 35 per cent of your gross income.

For first time investment borrowers, factors such as acceptable tax deductions such as depreciation and negative gearing are vital to include your calculations about the proposed investment and its associated costs/benefits.

Getting help

Many people choose the help of a professional credit adviser when shopping around for their first home loan, and for good reason. Using a credit adviser to seal the deal can give you greater choice, peace of mind and clarity, especially for those just starting out in the property market.

Credit advisers have a wealth of knowledge to steer you in the right direction in terms of what you can realistically afford versus what you think you can afford.

There are many home loan calculators that can also help buyers get a sense of their borrowing capacity. These online calculators factor in your loan type, loan length and interest rates to calculate a general repayment figure. Your credit adviser will be able to walk you through these calculations to ensure you’re aiming for the right figures.

Doing your due diligence from the very start will pay big dividends when it comes to home ownership in Australia. Putting your expenses under the microscope may be intimidating at first, but it will ensure your home loan works as hard for you as you did for it.

How do I get assistance with getting finance approval?

The team at Naritas are experts in delivering timely guidance & finance approvals.  We have over 100 lenders on our panel & a high quality team of dedicated advisers to steer you efficiently through the approval process.

To make an enquiry online with our team, click here. Alternatively please feel free to phone us on 1300 558 887 during business hours.