How much can you borrow? - Harvest Financial Group

The first step in working out how much you can borrow is to determine your financial situation. This involves working out your net income, expenses and other commitments. It is important to make your budget realistic, and to include all your expenses. It is not worth understating your expenses and commitments as it may put you under financial pressure down the track. Ideally keep a buffer of at least $500 per month in your budget to avoid mortgage stress.

From this point you can use the ASIC mortgage calculator to find out how much you can borrow, this can be found at
Moneysmart Mortgage Calculator

Or a general rule of thumb for borrowing capacity is

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(This rule of thumb assumes low other commitments, such as car loans, personal loans, credit cards, interest free purchases etc.)

Interest rate announcement – October 2015

Today the Reserve Bank of Australia met to review the official cash rate. They have decided to leave the rate steady at 2.00% again this month. We expect that most lenders will leave their interest rates unchanged, in line with the Reserve Bank’s decision.

An example:

A couple with a net household income of $10,000 per month

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This couple can comfortably afford maximum repayments of up to $4,500 per month. Based on the current interest rate of 4.13%, and the ability to make repayments of $4,500 per month, they could borrow up to $750,000 factoring in a 2% rate increase.

What happens if interest rates rise?

Essentially, if interest rates rise so do your mortgage repayments if you are on a variable rate. There are some things you can do to prepare for interest rate rises:

Borrow more than you need in the initial loan application
Request an interest only loan and repay more
Fix a portion of the loan (make this portion larger if cash flow is tight)
Repay extra off the loan while rates are low

All of these strategies can provide a buffer that can be drawn upon if you find yourself under financial stress.

We can assist you with your home loan

Shopping around, comparing and negotiating may save you thousands of dollars. We can assist with this research and decision making process free of charge.

At Harvest we provide independent advice about home loans based on your personal financial situation, and therefore, do not favour any particular lender. We have access to 27 loan providers to make sure you get the best value home loan by customising a package for you that best meets your needs.