Working out how much you can afford

First home ownership can feel complicated, especially if you have an irregular income or a small deposit. Let’s get an idea of how much you can borrow.

Remember, any advice provided on this website is of a general nature only and does not take into account your personal needs, objectives and financial circumstances. You should consider whether it is appropriate for your situation.

Whether you're eyeing off an apartment in town or the quiet suburban dream, owning your own place is a huge, exciting commitment. But to avoid heartache while scouring real estate listings, let’s first get a ballpark on what you can afford.

Calculate your current living expenses

When you ask a bank about a home loan, the first thing they’ll do is figure out your 'borrowing power.' This is basically how much you can borrow, plus your deposit, to make your home-owning dreams come true.

They'll look at your whole financial picture—not just your income and savings, but also your expenses. This means everything you regularly spend on: rent, car payments, transport, food, phone bills etc. They’ll also consider any other debts, like car loans or credit card limits.

As an Upsider, you can get a head start by using the Home Zone—our super-fast in-app tool. It uses your Up spending insights to help you understand what you can afford to borrow.

Play around with some calculators

You know your monthly spending better than anyone. This will help determine what you can borrow.

A lender will look at your spending, interest rates, the size of your deposit, whether you're applying alone or with a partner, and more. Income type matters too —casual, irregular income might lead to different borrowing amounts compared to a steady full-time salary. And different banks will come up with different numbers.

Your borrowing power also depends on whether you choose a principal and interest or interest-only loan, and whether you go for a fixed or variable rate. Don’t forget to include additional costs like establishment fees, conveyancers, insurance, and stamp duty.

Essentially, a lender just wants to make sure you can make mortgage repayments now and in the future, especially if interest rates rise or your income fluctuates.

Use the Home Zone in-app to easily calculate how much you can borrow. Just answer a few simple questions about your goals and current financial situation and you’ll know roughly what you can borrow and what to strive for.

Decide how much you’re comfortable repaying

You don't have to borrow to the top of your limits. You should feel comfortable you're not over-committing or changing your wants and needs to suit anyone else's plan.

The general consensus is that a safe estimate for mortgage repayments is about 30% of your income. So, if you're earning $50,000 p.a., you might allocate about $1300 a month to paying off your new place.

But maybe that's not right for you. Maybe you want to keep a bit in the tank, knowing that your income fluctuates or that you might want to travel for 6 months. There’s nothing wrong with deciding you'd be more comfortable with a smaller mortgage repayment.

Playing around with figures can help you strike the balance between your budget and your heart. It's also totally reasonable to give a few lenders a call and talk through numbers without a clear intent to borrow right now. With a clearer picture of your finances, you'll know where to set your 'from' and 'to' price filters to avoid disappointment.