How much can I borrow?

Unsurprisingly, the most common question that first time buyers ask is how much they can borrow.

There is no one size fits all when it comes to how much you can borrow (also called your borrowing capacity), so it’s smart to speak with an expert who can crunch all the numbers with you.

Mortgage broker Matt Reece from Loanseeker in Melbourne says how much someone can borrow will ultimately come down to how much they can comfortably afford to repay.

“Lenders will assess your income and outgoings. Even though interest rates are at record lows, borrowers need to show that they can afford home loan repayments at least 2 per cent higher than today in case rates were to increase in the future. Your broker will sit down with you and calculate all these numbers to work out what you can comfortably afford to borrow,” Matt explained.

But there may also be some ways to increase your borrowing power. “If you can reduce your expenses, you can improve your borrowing power. Some examples of how this can be done include creating and sticking to a budget, and looking for ways to save by shopping around for cheaper car/health/life insurance, reducing your credit card limit/s, paying off personal loans or other debts, taking packed lunches to work, and using public transport. These are the same tips I’d give someone trying to save up a larger deposit,” Matt said