Whether you’re saving for your first home, upsizing into a new property or weighing up your next investment, the question is the same: how much can you actually borrow? Here’s some good news, that number is easier to work out than most people think. This blog will walk you through what lenders actually assess, the common misconceptions when borrowing and how to get an accurate number so you can plan your next chapter with confidence.
Decode your borrowing capacity
Lenders don’t just assess your income and then give you a figure. They look at your income minus your expenses, then stress-test a range of other factors:
- Verifiable income: your base salary, plus bonuses, commissions and overtime. If you’re self-employed, think payslips or BAS statements.
- Expenses: everyday living costs, bills and subscriptions
- Existing debt: personal loans, car loans and credit cards.
- Credit score: your track record of paying things on time, which feeds into how a lender views your overall reliability.
- Deposit size: how much you’re putting in upfront, and where it’s come from.
On top of that, lenders build in a buffer for future interest rate rises, so your number reflects what you could still comfortably repay if rates have moved, not just today’s repayment.
Debunk the common misconceptions
A bigger deposit doesn’t necessarily increase your borrowing power. What matters most to a lender is your cashflow and ability to meet repayments. It’s also worth remembering that borrowing capacity isn’t the same as affordability: affordability is about what you feel comfortable repaying each month, based on your lifestyle and goals. Setting that number for yourself before you start looking, and sticking to it, can make all the difference.
Another one we hear a lot: house and land packages need a bigger deposit than an established home. In practice, it’s often the opposite. Some of the confusion comes from two deposits, a smaller holding deposit that secures your land and the larger home loan deposit used in your actual application. Add in the government support available to new-build buyers (more on that to follow), and a house and land package can end up needing less upfront than an established home of the same value, not more.
Strengthen what you can borrow
The good news? Your borrowing capacity isn’t set in stone, and a little preparation before you apply can go a long way. Here’s how:
- Review your existing loans: paying down or closing credit cards and personal loans you no longer need can meaningfully increase what a lender is willing to approve.
- Keep a clear savings pattern: regular, visible savings demonstrate financial discipline and can strengthen your application.
- Get organised early: current, consistent payslips, tax returns and bank statements help avoid delays once you’re ready to move.
- Talk to a mortgage broker: Lera works with some of Victoria’s largest brokers who can compare lenders, flag where your application could be stronger and give you a clearer, lender-backed picture of what you can afford before you start shortlisting lots.
- Check what government support you’re eligible for: depending on your circumstances, you could be eligible for stamp duty exemptions, deposit schemes like the Australian Government’s 5% Deposit Scheme that lets you buy with a smaller deposit or the First Home Owner Grant which is a $10,000 payment for newly built homes, including house and land packages like ours at Lera. Eligibility varies, so it’s worth confirming what you qualify for with the state authority or speaking to a mortgage broker for more information.
Get a number, not a guess
If you’re looking to get a clear picture of what you can borrow, speak to the dedicated team at Lera first. We can put you in touch with a team of mortgage experts who will look at your specific income, expenses and deposit size to give you an accurate, tailored figure. Because every lender applies its own unique criteria, speaking directly with a specialist ensures you get proper guidance across different lenders rather than relying on a generic estimate.
Switching the narrative from “this is what I think I can afford” to “this is what I can afford” changes the whole experience buying. This means you can shortlist your options with confidence, instead of crossing your fingers. As for a second opinion, this can be the difference between settling for what you can afford and securing what you really want.
Find your dream lot at Lera
If you’d like to talk through your borrowing capacity, get in touch with our Estate Manager, Vladimir Taraskin, who can answer any questions you might have and connect you with our mortgage broker to kickstart your buying journey. You can reach him on 0438 265 798 | 03 9115 8651.