September 11, 2023 | 6 min read
Summary: Securing a mortgage is a significant milestone in our lives. Understanding how much you can borrow (and how much you should borrow) is crucial to making a well-informed decision. By considering your income, debt-to-income ratio, expenses, LVR, interest rates, credit history, and financial goals, you can determine an appropriate borrowing amount that aligns with your financial capabilities and aspirations.
Buying a home is a major financial decision. For most of us, it is the most substantial investment we will make in our lifetime.
Typically, securing a mortgage is necessary to achieve this dream, so it's essential to understand how much you can borrow responsibly and what factors to consider when determining the appropriate borrowing amount.
This guide provides you with a comprehensive understanding of how your mortgage borrowing power is calculated and how to make informed decisions about borrowing responsibly.
Several factors influence the amount you can borrow for a mortgage in Australia. The key considerations are:
While it's essential to know how much you can borrow, it's equally crucial to determine how much you should borrow responsibly. Taking on too much debt can put you at risk of financial strain and limit your ability to cope with unexpected circumstances.
There are a number of considerations when deciding on an appropriate borrowing amount:
Homeownership comes with various unexpected expenses, such as maintenance and repairs. It's wise to have a financial buffer to handle these costs without stretching your budget to the limit.
Remember, whilst a lender may approve a significant mortgage amount, it's essential to be realistic about what you can comfortably afford. Overextending yourself financially can lead to stress and financial strain in the long run, so it is wise to consider the following:
Securing a mortgage is a significant milestone in our lives. Understanding how much you can borrow (and how much you should borrow) is crucial to making a well-informed decision. By considering your income, debt-to-income ratio, expenses, LVR, interest rates, credit history, and financial goals, you can determine an appropriate borrowing amount that aligns with your financial capabilities and aspirations.
A reputable mortgage broker can provide valuable insights and guidance throughout the process of obtaining a mortgage and selecting an appropriate loan amount.
Always remember that responsible borrowing ensures a more stable financial future and helps you achieve your homeownership dreams whilst maintaining a healthy financial outlook.
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This article has been prepared by NULIS Nominees (Australia) Limited ABN 80 008 515 633 AFSL 236465 (NULIS) as trustee of the MLC Super Fund ABN 70 732 426 024. NULIS is part of the Insignia Financial group of companies comprising Insignia Financial Ltd ABN 49 100 103 722 and its related bodies corporate (‘Insignia Financial Group’). The information in this article is current as at November 2023 and may be subject to change. This information may constitute general advice. The information in this article is general in nature and does not take into account your personal objectives, financial situation or needs. You should consider obtaining independent advice before making any financial decisions based on this information. It is recommended that you consider the relevant Product Disclosure Statement (PDS) and Target Market Determination (TMD) before you make any decisions about your superannuation. You can obtain the latest copy of the PDS (or other disclosure documents) and TMD by calling us on 132 652 or by searching for the applicable product at mlc.com.au. You should not rely on this article to determine your personal tax obligations. Please consult a registered tax agent for this purpose. Opinions constitute our judgement at the time of issue. The case study examples (if any) provided in this article have been included for illustrative purposes only and should not be relied upon for decision making. Subject to terms implied by law and which cannot be excluded, neither NULIS nor any member of the Insignia Financial Group accept responsibility for any loss or liability incurred by you in respect of any error, omission or misrepresentation in the information in this communication.