Here's our tips in figuring out what mortgage you can afford
Check to see if you are eligible for a home loan
Buying a home starts with one big question — what house price can I afford? Lenders use detailed calculations to determine your borrowing power, factoring in your income, expenses, debts, and even potential rate rises. In this guide, we’ll break down how to estimate your true buying limit, improve your affordability, and make sure your dream home fits comfortably within your budget.
Let’s dive in
Some banks call it serviceability, others call it affordability, and you might have heard it being called borrowing power.
But at the end of the day, all you want to know is – how much can I afford to buy?
Using our calculator, we look at what you’re currently paying in rent and your weekly savings, which is your surplus money after expenses. We use this figure to find your house price guide.
Follow the steps to work out your house price guide:
Essentially, what you can afford depends on your current earnings and what you spend out of that. It’s all about your incoming versus outgoing money.
Nobody likes the B-word (budget), but realistically, this is what the next step is to start consolidating your spending.
Please speak to our team about this, as we truly have some thrifty savers at the forefront of Hunter Galloway.
As a general rule, you should use no more than 28% of your monthly income to make loan repayments. Although buying a house is a crucial investment, it should stay within your spending limit. Going beyond your limit can be risky, especially if interest rates increase.
Top tips for tightening your expenses:
If you earn $850 per week (after tax), then 28% would be $238. This is the amount you want to pay towards your mortgage to stay within your spending limit.
If you want to buy something nicer but cannot afford it, consider buying with a partner or family member to make your repayments more affordable.
Understanding how banks calculate your borrowing power can help you take control of your home loan journey. Every lender uses a serviceability model to estimate how much you can safely afford to borrow — not just how much you want to borrow.
When you apply for a home loan, lenders test your serviceability — your ability to repay the loan comfortably. They start by calculating your surplus income— the money left after your living costs and debts.
But they don’t stop there. To make sure you can handle future rate hikes, most banks apply a 3% to 3.5% interest rate buffer.
For example:
This rule comes from APRA’s lending guidelines, which protect borrowers from taking on too much debt.
In short: Lenders aren’t trying to make life harder — they’re making sure you don’t borrow beyond your comfort zone.
Your income plays the biggest role in your borrowing power — but not every dollar counts equally.
Here’s how most banks treat different income sources:
To improve your serviceability, show at least six months of stable income history. Lenders value consistency over big one-off payments.
Gone are the days of self-declaring your monthly grocery or entertainment budget.
Banks now use HEM (Household Expenditure Measure) benchmarks, based on data from the ABS (Australian Bureau of Statistics). This benchmark gives lenders a realistic idea of how much an average household spends based on family size, income, and location.
However, if your declared expenses are higher than HEM, lenders will use the higher figure. So it’s smart to review your spending habits before applying.
Credit cards, personal loans, and even Buy Now, Pay Later accounts can reduce your borrowing power — even if you don’t owe anything.
Lenders assess your credit limits, not your balances. So, if you have a $10,000 limit on a card you never use, banks still assume it’s potential debt.
That’s because they must calculate your debt-to-income (DTI) ratio, which measures how much you owe compared to what you earn. The higher your DTI, the lower your borrowing capacity.
If you’re serious about buying soon, here’s a simple move: Reduce unused credit card limits before applying.
This can instantly improve your DTI and boost your borrowing power by up to $50,000, depending on your income and lender.
Understanding how banks calculate your borrowing power helps you make smarter decisions — and prepare better before applying. Clean up debts, track your spending, and show consistent income. That way, you’ll stand out as a strong borrower and maximise your chances of approval.
The more you can save, the better off you’ll be. As the example above shows, if you aim for 28% of your income for the repayments, it actually isn’t a lot.
However, a bigger deposit will help you increase your borrowing capacity and reduce your loan. It also means that you won’t need to pay lenders mortgage insurance (LMI). Generally, if you have less than a 20% deposit, you’ll need to pay LMI, so to remove this extra cost, save a bigger deposit.
Ideas to increase your deposit:
Check to see if you are eligible for a home loan
Your borrowing power isn’t one-size-fits-all. Lenders assess every borrower differently based on income stability, employment type, and financial backing. Let’s break down how this looks for different buyer types — and what you can do to improve your results.
A single borrower often faces tighter limits because they rely on one income. Couples, on the other hand, usually have a higher combined borrowing capacity since both incomes are assessed.
For example:
Even though couples can often borrow more, lenders still look closely at each person’s credit history and financial commitments.
Tip: Whether you’re single or part of a pair, reducing personal debts and tightening your budget can boost your serviceability fast.
If you’re self-employed, lenders want to see steady income over time — not just one great year. Most banks ask for two years of tax returns and business financials.
They’ll then calculate your average income over that period. If the most recent year’s income is lower, some lenders will use the lower figure to stay conservative.
However, some allow “add-backs” — adding back non-cash or one-off expenses such as depreciation or personal car costs. This can increase your usable income and improve your borrowing power.
Tip: Keep your financial statements clean and up to date. Using a mortgage broker experienced in self-employed home loans can also open more flexible lender options.
If you work casually or on contract, you can still qualify for a home loan. Many lenders now accept variable income if you can prove stability — usually six to twelve months of consistent work and earnings.
Some even average your income across that period to show a reliable pattern. Regular hours, long-term contracts, or steady employment within the same industry can make a strong case.
Tip: Supply recent payslips, bank statements, and employment letters to help lenders see your consistent income stream.
A family guarantor can make a massive difference to your borrowing capacity. By using equity from a parent’s property as security, you can borrow up to 105% of the purchase price and avoid Lenders Mortgage Insurance (LMI).
This can effectively boost your borrowing power without needing a larger cash deposit. Just remember — your guarantor shares the risk. If you default, their property could be affected.
Tip: Once your loan balance drops below 80% of the property value, you can remove the guarantee.
Here’s how borrowing power can vary depending on buyer type and income:
Buyer Type | Annual Income | Approx. Borrowing Power* | Key Notes |
Single (PAYG) | $70,000 | $420K – $450K | Based on one stable income |
Couple (2 PAYG incomes) | $120,000 | $720K – $760K | Dual income boosts serviceability |
Self-Employed | $120,000 (avg) | $650K – $700K | Depends on two years’ tax returns |
Casual/Contract Worker | $90,000 | $500K – $550K | Income stability is key |
Guarantor Buyer | $90,000 + guarantor | Up to $600K+ | May avoid LMI, higher effective borrowing power |
*Estimates only. Based on average rates and living expenses. Actual borrowing power depends on lender policy and personal circumstances.
Different buyer types face different borrowing limits — but with the right strategy, you can still maximise your loan potential. Whether that means consolidating debt, improving income documentation, or adding a guarantor, small changes can make a big difference to your borrowing power.
If you’ve decided to hold off on buying for a little while, then consider practising your mortgage repayments ahead of time so you can truly understand how buying a home will affect your monthly budget.
This is especially appropriate for those whose estimated mortgage is higher than their rent. So, for the next few months, start putting away the extra money that you’d put towards your mortgage repayment to simulate making that payment and see if your budget feels comfortable.
If you’re struggling, then it’s time to reconsider what you can afford.
The strategy, in summary, is:
Read More: What to know about applying for a home loan
Now it’s time to be brutally honest with yourself, and a word of warning – it may end in tears, but you’ve got to do it (sorry).
Your debt-to-income ratio requires you to figure out all your monthly debt payments (car loan, credit card bills and future mortgage payments) and divide it by your gross monthly income (what you earn before taxes).
The lower your DTI is, the more financing options you will be able to access.
Certain lenders apply a DTI limit, including Commonwealth Bank, National Australia Bank and Non-Bank lenders, which means that they set a cap on how high the applicant’s DTI can be in order to qualify for the loan.
Let’s look at how DTI works.
For example, you’re a couple earning a gross income of $50,000 per year each ($100,000 in total), and you’d like to borrow $350,000. You worked out your total liabilities as follows:
$350,000 for your new mortgage + Credit card monthly limit of $1,000= Total debt: $351,000
Now it’s time for the mathematics:
$351,000 (debt) ÷ $100,000 (total income) = 3.51 DTI
So in simple terms, your total debt is 3.51 times your combined income.
Is 3.51 a high DTI?
The above example is mostly considered to be normal.
Generally, a DTI higher than 6 times the borrower’s income (6 DTI) is considered high risk. This DTI would put the borrower under a lot of financial stress if their financial situation changed suddenly or if interest rates rose.
Your credit score affects your borrowing power, so if you’ve got bad credit, then it’s time to turn this around.
Credit scores are calculated on your history of repaying loans and bills and how many times you’ve applied for credit.
If you’ve defaulted on a loan in the past or been bankrupt, then this will affect your score.
Tips to help your credit score:
Hunter Galloway can send you your free credit score to help get this step moving.
There are a few factors that come with borrowing money, and one of them that’s often forgotten is how important the good ol’ credit score is.
As we mentioned above, your payment history matters, especially whether you’ve been on top of your payments in the past. However, a lender will also consider all your other types of credit (credit cards etc.) when determining how much you can afford.
So even if you have a credit card sitting around gathering dust with a $20,000 limit on it, this will significantly affect how your lender perceives your application.
Why?
Because, essentially, in their eyes, nothing is stopping you from going out and dropping that $20,000 on a new car tomorrow.
Credit cards can massively reduce your borrowing power. Broadly speaking, a $10,000 limit credit card can reduce your borrowing capacity by between $30,000 to $50,000!
Credit tips:
It’s time to conduct detailed research to determine market prices and rates.
Comparing home loans will enable you to make the right decision and find out the maximum loan you should borrow that allows you to live comfortably.
For example, you wish to borrow f $300,000 and have to make a monthly repayment of $2,000 based on the lender and cash rate.
Before you sign up for it, ask yourself the following questions:
If the answers to the above questions are yes, then you’re in the clear. But if you answered no to a single question, then consider postponing the decision to buy a house until you are ready.
Speak to our team about creating a budget plan and helping you figure out what you can afford.
Read More: How much will my home loan repayments be?
Would you like to learn about your situation?
There are several home loan packages in the market. Every individual’s financial situation is different, so a single home loan may not be suitable for everyone. Therefore, it is important to find a package that suits your financial goals. If you’re a first-home buyer and need a complete guide, you can find that here.
The following are a few things you need to consider when finding a loan package:
The reality is different loans are going to suit different people.
Read More: 10 [simple] Tips for Choosing the Best Home Loan in Brisbane
When you ask yourself, “how much house can I afford?”, it’s easy to focus on your current budget. But what happens if interest rates rise — or your income falls?
Let’s say you have a $500,000 home loan with a 30-year term at 6% interest.
That’s an extra $480 per month — or nearly $5,800 more per year.
Even a small rise in rates can stretch your budget quickly, which is why planning ahead makes a big difference.
Life doesn’t always go as planned. Redundancy, reduced work hours, or time off for family can lower your income unexpectedly.
A good rule of thumb is to stress-test your income too. Ask yourself:
“If my income dropped by 10%, could I still cover my loan, bills, and groceries comfortably?”
If the answer is no, it’s time to build a stronger financial cushion.
You can’t control interest rates, but you can control how prepared you are.
Here’s how to protect your home loan affordability:
Interest rate rises and income changes are part of life — but they don’t have to derail your homeownership plans. By stress-testing your budget and planning ahead, you’ll feel confident knowing your loan is affordable in every season.
Earning around $70,000 a year and wondering if homeownership is still possible in 2026? With headlines about rising property prices and cost-of-living pressures, it can feel out of reach — but it’s not impossible.
How much you can afford to buy in Australia depends on two main things: your borrowing power and your deposit size.
If you earn $70,000 a year, your estimated borrowing power in 2026 sits between $420,000 and $450,000, assuming:
This estimate also factors in around $100 per week in strata or body corporate fees, which some lenders include when calculating affordability. A higher ongoing cost (like strata or insurance) can slightly reduce your borrowing limit.
Keep in mind, your borrowing capacity isn’t fixed. Lenders look at your overall financial picture, including income stability, living costs, and deposit amount.
Your deposit directly impacts both how much you can borrow and the total property price you can afford.
Here’s what that looks like on a $70K salary:
Deposit Size | Deposit Amount | Approx. Property Value You Can Afford | Notes |
10% | $42,000 | $460,000 | May require Lenders Mortgage Insurance (LMI) |
15% | $63,000 | $480,000 | Reduces LMI and builds stronger equity position |
20% | $84,000 | $500,000 | Avoids LMI, offers better loan options and flexibility |
While you may not score a home in Sydney’s inner suburbs, there are still affordable pockets across Australia where a $70K income can get you started.
Queensland – Logan Central and Woodridge offer affordable units under $400K, close enough to Brisbane for easy commuting.
Western Australia – Osborne Park has well-priced apartments near Perth, with access to dining and shopping without city-centre prices.
ACT – Watson provides great value for unit buyers seeking a balance between greenery and proximity to Canberra’s CBD.
Victoria – Up-and-coming areas like West Footscray and Travancore are gaining popularity for their proximity to Melbourne’s city centre.
New South Wales – In Sydney, consider Kingswood or Mount Druitt in Western Sydney, both with train access to the CBD and entry-level prices.
Tasmania – Glenorchy remains an affordable choice near Hobart, offering a relaxed lifestyle close to nature.
If you’re open to regional areas, you’ll get far more value for money:
Your first home doesn’t need to be your forever home — it can be a stepping stone. Over time, you can build equity and upgrade to your ideal property.
Owning a home isn’t just about what the bank lends you — it’s about managing the ongoing costs.
Up-front costs can include:
Ongoing costs include:
Let’s break it down:
That brings total housing costs to roughly $3,150–$3,700 per month, or about 54%–63% of your monthly income.
Financial experts generally suggest keeping housing costs under 30%–35% of your gross income for long-term comfort. However, with careful budgeting and a stable income, some borrowers manage slightly higher ratios when buying their first home.
Buying a home on a $70K salary in Australia is challenging — but not impossible. With the right deposit, smart suburb choice, and financial preparation, you can still get on the property ladder in 2026.
Before you start house hunting, talk to a mortgage broker. They’ll help you calculate your true borrowing power, find lenders that suit your income type, and make sure you can afford your dream home without financial stress.
Banks calculate your borrowing power by assessing your income, living expenses, and existing debts. They also apply a 3% interest rate buffer to check if you could still afford repayments if rates rise. Other factors include your deposit size, credit score, employment type, and number of dependents.
Most experts recommend keeping home loan repayments below 30% of your gross income. This “mortgage stress” threshold helps ensure you can comfortably manage other expenses — even if interest rates or living costs increase.
To boost your borrowing power, pay off personal loans, reduce credit card limits, and cut back on discretionary spending. A larger deposit and higher credit score also make you more appealing to lenders. Applying with a joint borrower can further increase your loan capacity.
You’ll typically need an annual income of around $90,000–$100,000 to comfortably afford a $500,000 home loan in Australia. This assumes moderate expenses and an interest rate around 6%. Using a borrowing power calculator can give you a more accurate estimate based on your situation.
How much you can afford depends on your income, debts, expenses, and deposit. As a guide, most lenders let you borrow 4–6 times your annual income, depending on your financial profile and the lender’s policy.
Yes — but it’s challenging. With government schemes like the First Home Guarantee, eligible buyers can purchase with as little as 5% deposit (around $25,000 on a $500,000 home). A $10,000 deposit may be possible if you use a guarantor or access state-based first home buyer grants.
To buy a $650,000 home, you’ll generally need a combined income of around $110,000–$120,000 per year. The exact figure depends on your deposit, interest rate, and existing debts.
On a $60,000 annual salary, most lenders would offer a loan between $340,000 and $380,000, depending on your expenses and credit profile. Lowering debts and reducing credit card limits can help you qualify for a higher amount.
Our team at Hunter Galloway is here to help you buy a home in Brisbane. Unlike other mortgage brokers who are just one-person operations, we have an entire team of experts dedicated to helping make your home loan journey as simple as possible.
If you want to get started, please give us a call on 1300 088 065 or book a free assessment online to see how we can help.
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