Borrowing capacity to buy a Sydney house

by John Pierre Saliba, March 15, 2017



You’ve worked hard to save money for your first dream home. Now that you think you’ve saved enough money for a deposit, and you’re in the market to buy a house in Sydney, how much home loan can you get?

Here are some factors that will affect the amount of home loan you can borrow.


Type of Property

The type of property you’re buying affects the amount of money you can borrow from a financial institution. For example, you’re likely to be able to borrow more if you’re purchasing an established property than an “off the plan” property that doesn’t even exist yet.


Location of Property

Financial institutions also take into account the location of a property when they determine the amount if home loan they can lend. For example, it’s riskier to lend money to someone who wants to buy a house in a flood-prone area than others.


Value of Property

The value of the property you want to buy influences your home loan borrowing capacity. A property’s value may be different from its price. For example, a property priced at $800,000 may only worth $700,000. Your lender will conduct a valuation of the property before they know how much they can lend you.


Amount of Property Deposit

Lenders like to see that you have genuine savings, which are money you’ve been saving over a period of time. The more money you have saved, the easier it is to increase your borrowing capacity.


Household Income

Your household income is an indicator of your ability to repay your home loan. In general, if your mortgage payment is more than 30% of your household income, you’re in the “debt stress” danger zone.


Financial Commitments

When determining how much money to lend you, your lender will look at your living expenses, which depends on your lifestyle. In addition, your lender will look at your other financial commitments, such as your car loan, credit card loans, as well as other outstanding debts, when they determine your borrowing capacity.


Credit Rating

Your credit rating tells your lender how creditworthy you are. If you can prove to your lender that you can pay your debt on time, they are likely to lend you a higher amount. Before you talk to a lender, get a copy of your credit file to see if there are any issues you can resolve first.

When you buy a home, it’s important to make sure that you can afford it. A home loan specialist or Sydney mortgage broker can help you work out how much you can borrow before you go house shopping.