How much can I afford to borrow to buy a house with my salary?

Here's a quick way to calculate what you can afford to borrow and repay based on your income.

Updated

When a lender looks at your mortgage application they generally assume about 30% of your gross income can be used to make loan repayments. Then they factor in your debt, assets and spending to forecast your borrowing power.

But to get a rough idea of what you can realistically afford, you can look at:

  1. Your annual income
  2. Your deposit size

How can you estimate an affordable property price?

Take 30% of your annual gross income, equate this into a loan amount using an average rate of 4.5%, take a 5% deposit , and then use this to estimate a potential purchase price.

Assuming that the applicant doesn’t have any debts or liabilities, and using a rate of 4.5% over 30 years, here are three scenarios:

Scenario 1 - $50k income

  • $50,000 annual gross income - 30% = $1,250 per month at 4.5% p.a., which equates to a loan amount of $246,000.

With a 5% deposit contribution, the maximum affordable property price would be $260,000.

Scenario 2 - $75k income

  • $75,000 annual gross income - 30% = $1,875 per month at 4.5% p.a., which equates to a loan amount of $370,000.

With a 5% deposit contribution, the maximum affordable property price would be $390,000.

Scenario 3 - $100k income

  • $100,000 annual gross income - 30% = $2,500 per month at 4.5% p.a., which equates to a loan amount of $493,000.

With a 5% deposit contribution, the maximum affordable property price would be $520,000.

How can first home buyers prepare for home ownership?

If you're a first home buyer and you've saved up a deposit, test yourself using a mortgage repayment calculator.

  • Work out how much you currently spend on rent.
  • Calculate what your monthly mortgage repayments would be with a loan amount you feel comfortable with.
  • What's the difference? Can your bank balance handle the increased costs?

To make this test more real, try it for a few months and actually remove the extra money from your spending account. Can you live without it?

Be sure to factor in other ongoing costs, such as home and contents insurance or body corporate fees.

You can still try this test if you're currently living with your parents. You just need to estimate your costs for groceries and utilities along with your mortgage costs.

Looking for a home loan? Check out these offers and apply today

Data indicated here is updated regularly
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Loan purpose
Offset account
Loan type
Repayment type
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Name Product Interest Rate (p.a.) Comp Rate^ (p.a.) Application Fee Ongoing Fees Max LVR Monthly Payment Short Description
UBank UHomeLoan Variable Rate - Discount offer for Owner Occupiers, P&I Borrowing over $200,000
2.59%
2.59%
$0
$0 p.a.
80%
Enjoy flexible repayments, a redraw facility and the ability to split your loan. Plus, pay no application or ongoing fees.
HSBC Home Value Loan - Promotional Offer (Owner Occupier P&I)
2.65%
2.66%
$0
$0 p.a.
80%
Get a low interest rate loan with no ongoing fees. Plus you can make extra repayments and free redraw online.
loans.com.au Smart Home Loan - (Owner Occupier, P&I)
2.63%
2.65%
$0
$0 p.a.
80%
Get a low variable interest rate and pay 0 application or ongoing fees with this convenient online lender.
Suncorp Back to Basics Home Loan - Better Together Special Offer $150k+ LVR<=90% Incl. LMI (Owner Occupier, P&I)
2.78%
2.79%
$0
$0 p.a.
90%
Get one free online redraw per month and pay no ongoing fees. Application fees are waived for loans above $150,000. Eligible refinancers can receive a cashback of $2,000 or more.
State Custodians Low Rate Home Loan with Offset - LVR up to 80% (Owner Occupier, P&I)
2.65%
2.67%
$0
$0 p.a.
80%
This loan offers a competitive variable rate and a 100% offset account to help save you on interest repayments. This loan is not available for construction.
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