Factors Affecting Your Borrowing Capacity

Borrowing Capacity

Why are some customers able to borrow more than others? The borrowing capacity determines how much a customer is able to borrow from a bank or lender to purchase a property. There are several main factors that play into how much you are allowed to borrow and what will reduce your borrowing capacity. Some are more common than others.


The most basic factor that banks are looking for would be a consistent cash flow. The more stable a person’s cash flow is the more likely a lender will approve your loan and the more you are able to repay the higher your borrowing capacity.

The simplest way is at it is to look at how consistent your Income minus Expenses will be.

For most people, the status of your employment whether it is full-time, part-time, casual or self-employed and the length of employment plays an important role to show lenders how stable your income is. The more you earn the more you are able borrow, as lenders see your higher earning capacity as an opportunity to lend you more funds as they are more confident that you are able to make the repayments.

For couples who are applying together with a combined income will increase your borrowing capacity.


How much you spend on a monthly basis, such as your household expenses will also be calculated. Lenders will use this information to deduct from your income to see how much you can repay on a monthly basis.

Factors such as the ones listed below may reduce your borrowing capacity.

  • Credit Cards
  • Debts
  • Student Loan
  • Household Expenses (Groceries, Insurance, Phone Bills etc.)

Outstanding debt will indirectly reduce your borrowing capacity and some banks may reject your loan application altogether if the amount of debt is high or can’t be justified.

Family Status

The more children and dependents that you are financially supporting will also be calculated as expenses.

Family factors include:

  • Childcare
  • Number of dependent children
  • Single, in a relationship or married
  • Child support payments

The amount of money paid to support family and dependents will indirectly affect the amount of income that lenders will look at.

If you are interested to find out more or have questions regarding home loans and your eligibility, drop us an email at [email protected] or call 0433 068 970

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