How to improve your borrowing capacity for a home loan

Your borrowing capacity is one of the most important factors in determining what property you can afford. It is calculated based on your income, expenses, debts, and overall financial position.

Lenders assess these factors differently, which is why two borrowers with similar profiles can receive very different borrowing outcomes.

What affects your borrowing capacity

Borrowing capacity is primarily influenced by your income, existing debts, living expenses, credit history, and deposit size.

Your loan structure also plays a role. For example, choosing between fixed vs variable rates can affect how lenders assess your repayments.

Reduce existing debts

Outstanding debts such as credit cards, personal loans, and buy-now-pay-later accounts reduce your borrowing capacity.

If you're consolidating multiple debts, you may also want to understand how debt consolidation through your mortgage can affect your position.

Improve your credit profile

Your credit history signals how reliably you manage repayments.

Increase your deposit

A larger deposit reduces the amount you need to borrow.

If you're a first home buyer, schemes like HomeStart Finance may assist.

Reduce your living expenses

Lenders assess your ongoing living expenses to determine affordability.

Understand total purchase costs

Upfront costs such as stamp duty in South Australia also affect how much you can afford.

Why lender choice matters

Different lenders apply different policies, which is why using a broker can produce different outcomes. See broker vs bank comparison.