How Much Can I Borrow on a $100,000 Salary in Australia?

Determining Your Borrowing Capacity

When earning a $100,000 salary, the amount you can borrow for a home loan in Australia depends on several factors. Lenders typically assess your borrowing capacity based on your income, existing debts, number of dependents, and lifestyle expenses. Most Australian lenders use a debt-to-income ratio to gauge how much you can comfortably borrow, which often ranges from 4 to 6 times your annual income.

For instance, on a $100,000 salary, you might expect to borrow between $400,000 to $600,000, depending on your financial profile and the lender's criteria. However, these figures are just a starting point and can vary significantly.

Factors Affecting Your Borrowing Power

Income and Employment Stability

Your income is a primary determinant of your borrowing capacity. Lenders prefer borrowers with stable and consistent income sources. If you're employed full-time, this can work in your favour. However, self-employed individuals may need to provide additional documentation, such as tax returns, to prove their income.

Existing Debts and Expenses

Lenders will scrutinise your current financial obligations, including credit card debts, personal loans, and living expenses. Reducing your outstanding debt can improve your borrowing power. It's advisable to pay down debts where possible before applying for a mortgage.

Credit Score

A strong credit score can enhance your borrowing capacity as it reflects your creditworthiness. Lenders are more likely to offer favourable terms to borrowers with a good credit history. Regularly checking your credit report and correcting any inaccuracies can help maintain a healthy score.

Deposit and Loan-to-Value Ratio (LVR)

Your deposit size impacts the loan amount you can access. Most lenders require a minimum 20% deposit to avoid lenders mortgage insurance (LMI). A larger deposit can reduce your LVR, potentially giving you access to better interest rates and loan terms.

Practical Tips to Maximise Borrowing Capacity

• Increase Your Income: Consider ways to boost your income, such as through a side job or investing.
• Manage Expenses: Create a budget to track and reduce unnecessary spending, improving your savings rate.
• Reduce Debt: Pay off high-interest debts to free up more of your income for mortgage repayments.
• Improve Credit Score: Regularly review your credit report and address any issues that could undermine your borrowing potential.

Common Mistakes to Avoid

• Overestimating Borrowing Capacity: Avoid assuming that you can borrow the maximum amount offered. Consider your comfort level with repayments.
• Ignoring Hidden Costs: Factor in additional costs such as stamp duty, legal fees, and moving expenses when calculating your budget.
• Not Seeking Professional Advice: A mortgage broker can provide tailored advice and help you navigate the complexities of home loan applications.

How Esteb and Co Can Help

At Esteb and Co, our experienced mortgage brokers specialise in guiding you through the home loan process. We understand the intricacies of different lenders' criteria and can provide personalised advice to maximise your borrowing capacity. Our team is committed to helping you secure the best possible terms for your mortgage, ensuring a seamless and stress-free experience.