How Much Can I Borrow on a $90,000 Salary in Australia?

Understanding Borrowing Capacity on a $90,000 Salary

When it comes to calculating how much you can borrow with a $90,000 salary, several factors come into play. Lenders assess your income, expenses, debts, and credit history to determine your borrowing capacity. Generally, lenders may offer to lend between 4 to 6 times your annual salary, but this is a rough estimate and can vary significantly.

Key Factors Impacting Your Borrowing Capacity

Income and Expenses

Your income is the starting point for calculating borrowing capacity. Lenders consider your gross income, including any additional earnings like bonuses or overtime. However, your expenses are equally important. Living costs, existing debts, and discretionary spending will affect how much a lender is willing to offer.

Interest Rates and Loan Terms

Current interest rates significantly impact borrowing capacity. Lower rates typically increase what you can borrow, as monthly repayments are lower. Additionally, the term of the loan influences how much you can borrow. Longer terms usually mean lower monthly repayments, increasing borrowing potential.

Deposit Size

The size of your deposit can affect borrowing power. A larger deposit reduces the loan-to-value ratio (LVR), which can result in better interest rates and borrowing terms. In Australia, a typical deposit is around 20% of the property's value, but some lenders may accept less.

Credit History

A strong credit history can enhance your borrowing capacity. Lenders prefer borrowers with a track record of managing credit responsibly. Regularly checking your credit report and maintaining good credit habits can improve your chances of securing a larger loan.

Practical Tips for Maximising Borrowing Capacity

1. Reduce Existing Debts: Pay down existing loans and credit card balances before applying for a mortgage. Lower debt levels improve your debt-to-income ratio, making you more attractive to lenders.

2. Budget Wisely: Create a realistic budget that accounts for all expenses and savings goals. A clear understanding of your financial situation helps you determine how much you can comfortably borrow.

3. Consider a Mortgage Broker: Engaging a mortgage broker can provide insights into different lenders' requirements and help you find a loan that suits your needs. Brokers have access to a wide range of products that might not be readily available to the public.

4. Boost Your Deposit: If possible, increase your savings to boost your deposit size. This not only improves your LVR but can also provide access to better loan terms and interest rates.

Common Mistakes to Avoid

Overestimating Borrowing Capacity

Many borrowers make the mistake of overestimating their borrowing power. It's crucial to base your calculations on realistic income and expense figures. Overcommitting can lead to financial strain in the long term.

Ignoring Additional Costs

Don’t forget to account for additional costs like stamp duty, legal fees, and moving expenses. These can add up quickly and affect your overall budget and borrowing capacity.

Neglecting to Get Pre-Approval

Obtaining pre-approval before house hunting gives you a clear picture of how much you can borrow and demonstrates to sellers that you're a serious buyer. It can streamline the buying process significantly.

How Esteb and Co Can Help

At Esteb and Co, our experienced mortgage brokers specialise in helping Australians maximise their borrowing capacity. We understand the intricacies of the lending market and can guide you through the process, ensuring you find a mortgage that suits your financial situation and goals. Our personalised approach ensures you receive tailored advice and support every step of the way.