Please note - Due to the holiday season, builders and developers may be slower than usual in responding to any queries Close

How Much Can I Afford To Borrow For My Dream Home?

When thinking of buying a new home, especially for a first home buyer, it is crucial to borrow responsibly and within your means. Overcommitting to a loan will mean compromising on lifestyle. A mortgage should not strain your finances, which is why we have created a handy guide to help in securing a realistic home loan.

Your borrowing power is determined by a few factors:

1. Your income 

Your income is a crucial contributor to your borrowing power. A lender will want surety that your income is secure and dependable. Generally, banks will calculate your lending capacity by subtracting expenses from your net income.

first home buyer

2. Other financial commitments
When a lender is considering your home loan application, they will deduct any liabilities from your income, this will affect your borrowing power. These financial commitments might include:

– Properties
– Mortgages
– Car loans
– HECs debt
– Credit card limits
– Personal loans

To determine your borrowing capacity, your lender should also scrutinise your ongoing lifestyle expenses. This will include the number of dependents in your family, in addition to:

– Insurances
– Mobile phone plans
– Childcare
– Gym memberships
– Additional cars


Possessing assets (such as investment properties, superannuation or cars) might improve your borrowing power.

So, how much should I borrow? 

Just because you can borrow up to a maximum amount, does not necessarily mean you should. To avoid mortgage stress, it is advised that you do not use more than 30% of your pre-tax income on home loan repayments. It is important for a first home buyer to reduce their risk and ensure that their finances could cover any repayments should their circumstances change. Specifically, consider the potential for rate rises or job loss to impact your capacity to meet repayments. Many lenders will also enforce a buffer, ensuring that you have money left over (after living expenses and repayments) to accommodate for any situational changes.

first home buyer budgeting

Some additional questions to ask yourself

How much debt can I handle?
Committing to a mortgage should not mean compromising on lifestyle. Spending any more than 30% of your pre-tax income on a mortgage might tip you into the ‘mortgage stress’ category, wherein families struggle to meet ongoing expenses such as utility bills. Before borrowing the maximum amount, consider the aspects of your life that you are willing to sacrifice. If you still want to eat out and take your family on holiday, it might be useful to opt for a smaller loan.

Interest rates
It is important to factor in potential rate rises and the impact they will have on your loan. If the RBA increases rates, will you realistically be able to make your repayments? To help mitigate this risk, ensure that you could handle a potential rate-rise of up to 2% on your current home-loan or organise a fixed interest rate.

Future plans
Are kids in your pipeline? Could your financial and family circumstances shift from a two-income household to a single-income household with dependents? As a first home buyer, this is something to consider before taking out a home loan, as a mortgage is a long-term financial commitment.

With a little planning and the right advice, the task of acquiring a home loan and building doesn’t have to be stressful! Book a call with our team of experts or call 1800 184 284 to get started today!

Manya Mehra


iBuildNew is the market leading aggregator dedicated to residential home construction and land development. As an independent platform, iBuildNew helps Australians identify and compare new home designs, house and land packages and land estates. It’s the smart way home buyers, who are considering a new build, can find the ideal options to match their individual needs. Home building is a big decision, we make sure you get it right.

You may also like

Sep 26, 2019

Treat Yourself: High-End Finishes to Include in Your...

Building a dream home is something we all envision as part of our life plan. While cust...
Read More
Jun 26, 2019

First Home Buyers: Here’s How Long It Takes To...

Saving can be challenging at the best of times, but saving for a first home deposit can...
Read More
May 27, 2019

Buying a House and Land Package? Here’s How To...

House and land packages are one of the most convenient and affordable ways to get a foo...
Read More
Oct 08, 2019

What To Look Out For At An Open Home

The open for inspection can be a critical time for most buyers as they survey their opt...
Read More
Jul 09, 2019

5 Hidden Costs That Shock First-Time Homebuyers 

It’s no secret that buying a home is a huge financial investment. In fact, it’s usually...
Read More
Oct 30, 2019

Getting A Pre-Approval Before Finding Your Dream Home

The journey from the borrower to a homeowner is an exciting yet daunting process that c...
Read More
May 06, 2020

Can I Still Sell My Home During the COVID-19 Pandemic?

With the current condition that the world is in, it is difficult to determine what is o...
Read More
Jan 25, 2019

What is buying off the plan and is it right for you?

For investors and first home buyers, buying off the plan can present an exciting opport...
Read More
Oct 25, 2016

First Home Finance Tips

Building your first home is probably the biggest decision you will ever make. The first...
Read More
Mar 05, 2019

Baby Boomers Buck the Downsizing Trend

When it’s just you and your partner, it seems simple and natural to live in a small spa...
Read More
Jul 10, 2019

Tips To Prevent Homebuyer’s Remorse

The journey to buying a house is an exciting, emotional experience that will surely lea...
Read More
Jan 08, 2018

No Land for Sale Near You? Here’s how to Finance a K...

Finding vacant land for sale in Melbourne is near impossible. And if you have your hear...
Read More
Jul 31, 2019

5 Tips on Downsizing Without Sacrificing Style 

Whether it be as you approach retirement or as you seek a simpler, less expensive way o...
Read More
Feb 03, 2017

The Parent Trap: Keeping Your Home Loan Under Contro...

This post was originally published at Building a new home is a drea...
Read More
Sep 25, 2019

Tips For Buying Off The Plan For First Home Buyers

The process of purchasing property can be a daunting time, especially for first home bu...
Read More
Oct 31, 2018

Are We Moving Towards a Buyer’s Market?

With falling markets in Sydney and Melbourne and analysts such as Louis Christopher fro...
Read More
Dec 12, 2017

6 Ways To Stretch Your New Home Building Budget

When you start building it is likely that your lender will set you a budget or a cap to...
Read More
Aug 22, 2019

Selling Your House? Here’s What To Expect

Buying property can be stressful, but so too can selling it. From the minute our home i...
Read More
Dec 10, 2019

How Much Can I Afford To Borrow For My Dream Home?

When thinking of buying a new home, especially for a first home buyer, it is crucial to...
Read More
Jun 08, 2017

Hidden Costs for First Home Buyers

Building your own house can be an exciting prospect. For starters, you get to own somet...
Read More
May 31, 2017

You Can Own Your First Home – Shared Equity Pr...

With traditional methods of saving a deposit and purchasing a first home seems to be ou...
Read More
Sep 10, 2019

Securing Your Dream Home: How Much Can I Really Affo...

Australians love to fear-monger about housing affordability. The key question when buyi...
Read More
Apr 04, 2018

How To Choose a Rental Management Company

Allowing someone else to manage your property is a bit of a scary thought. You want to ...
Read More
Mar 05, 2018

First-Time Homeowners: 6 Tips for a Perfect Home of ...

As a first-time homeowner, building or buying your first home is probably one of the bi...
Read More

Get more from

Browse New Home Designs