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Understanding Borrowing Capacity: 12 Key Factors to Consider

Navigating the world of home loans can be overwhelming, especially when it comes to understanding your borrowing capacity. Your borrowing capacity determines how much you can borrow from a lender, making it a crucial aspect of your home-buying journey. At Loan-Savvy, we're here to simplify this process and provide you with a clear understanding of the key factors that influence your borrowing capacity.

1. Income Is Vital to Your Borrowing Capacity

Your income is a pivotal factor that lenders consider when assessing your borrowing capacity. Both your gross and net income play a role, including any additional income sources you may have.

2. Employment Stability Matters

Lenders prefer a stable employment history. If you've been in the same job or industry for a while, it can positively impact your borrowing capacity.

3. Other Income Streams Count

Income from investments, rental properties, and other sources contribute to your borrowing capacity. These additional streams can enhance your loan eligibility.

4. Existing Financial Commitments

Your existing debts and financial commitments, such as credit card debt, personal loans, and car loans, can influence how much you can borrow.

5. Living Expenses Are Significant

Lenders assess your living expenses to determine how much disposable income you have. Being mindful of your spending habits can positively impact your borrowing capacity.

6. Dependents and Family Size

The number of dependents you have, as well as your family size, affects your borrowing capacity. Lenders consider these factors when evaluating your financial obligations.

7. Credit History Plays a Role

A healthy credit history demonstrates your ability to manage debt. Maintaining a good credit score can improve your borrowing capacity.

8. Loan Type and Interest Rates

The type of loan you choose and prevailing interest rates impact your borrowing capacity. Fixed or variable rates can influence the amount you're eligible to borrow.

9. Loan Term

The length of your loan term affects your monthly repayments. Shorter terms can potentially increase your borrowing capacity due to faster repayment.

10. Lender Policies and Criteria

Different lenders have varying policies and criteria for assessing borrowing capacity. Partnering with a mortgage broker, like Loan-Savvy, can help you find lenders aligned with your financial profile.

11. Property Type and Location

The type and location of the property you're purchasing can affect your borrowing capacity. Lenders assess the potential resale value and market trends.

12. Loan Repayment Frequency

Choosing a repayment frequency (monthly, fortnightly, weekly) can impact your borrowing capacity. Some frequencies may lower your repayments and positively affect your eligibility.


Understanding your borrowing capacity is essential for making informed decisions on your home loan journey. At Loan-Savvy, we specialise in demystifying complex financial concepts and guiding you through every step of the process. By considering these 12 key factors, you'll be better prepared to assess your borrowing capacity and secure the right home loan for your needs. Contact us today to gain insights tailored to your unique circumstances and embark on your homeownership journey with confidence.

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