What is Borrowing Power?
When buying a home in Melbourne’s West, such as Tarneit, Truganina, Werribee, Hoppers Crossing, or Point Cook, one of the first questions is: How much can I afford to borrow?
Borrowing power, or borrowing capacity, is the amount a lender is willing to lend you based on your income, expenses, debts, and credit history. It determines the price range of homes you can realistically buy and is key for first home buyers, investors, or people looking to refinance.
Many buyers assume their borrowing power is based solely on income. In reality, lenders consider many factors, and this is where a local mortgage broker can help you understand your true borrowing capacity.
MoneySmart Borrowing Power Guide
Factors That Affect Borrowing Power
-
Income – Includes your salary, bonuses, rental income, and other verifiable sources. Lenders in Melbourne may also consider your partner’s income if jointly applying.
-
Living Expenses – Standard benchmarks are applied by banks, but a broker can help you show actual expenses to maximise borrowing.
-
Existing Debts – Credit cards, personal loans, car loans, and other commitments reduce borrowing power.
-
Credit Score – A strong credit history increases your chances of approval and better interest rates. Check your score via Equifax Australia.
-
Deposit & LVR (Loan-to-Value Ratio) – Larger deposits lower LVR and may lead to better rates and lender flexibility.
How to Improve Your Borrowing Power
Improving borrowing capacity is about financial strategy, not gimmicks. Here’s how locals in Melbourne’s West can increase their borrowing power:
-
Reduce Debt: Pay down credit cards and personal loans to lower debt-to-income ratios.
-
Increase Savings: A bigger deposit improves LVR and shows financial stability.
-
Track Expenses: Maintain records of actual spending; lenders may consider this.
-
Boost Income: Consider side income or rental streams when applying jointly.
-
Work With a Broker: Brokers can access lenders that assess borrowers more flexibly than banks.
Learn more about how I can help with Home Loan Assessments.
Why a Mortgage Broker is Valuable
A mortgage broker in Melbourne’s West brings significant advantages:
-
Access to Multiple Lenders: I can compare 40+ lenders to find the right fit. Banks only offer their own products.
-
Negotiation Power: Brokers know lenders’ policies and can sometimes secure better terms or exceptions.
-
Local Knowledge: I understand the property market in Tarneit, Truganina, Werribee, Hoppers Crossing, and Point Cook — so I can advise realistically on borrowing for properties in these areas.
-
Best Interest Duty: By law, brokers must act in your best interest, ensuring your loan fits your needs rather than the lender’s profits.
Examples from Melbourne’s West
Case Study: A first home buyer couple in Tarneit with a combined income of $120,000 initially thought they could borrow $550,000. After reviewing their expenses and considering flexible lender policies, a broker was able to secure a borrowing capacity of $630,000, giving them access to more suitable properties.
Another example in Truganina involved a client with a smaller deposit. By showing actual living expenses and reducing a car loan, the client’s borrowing power increased by $40,000.
These are real-life examples of how working with a broker can make a difference when buying in Melbourne’s West.
Examples from Melbourne’s West
Case Study: A first home buyer couple in Tarneit with a combined income of $120,000 initially thought they could borrow $550,000. After reviewing their expenses and considering flexible lender policies, a broker was able to secure a borrowing capacity of $630,000, giving them access to more suitable properties.
Another example in Truganina involved a client with a smaller deposit. By showing actual living expenses and reducing a car loan, the client’s borrowing power increased by $40,000.
These are real-life examples of how working with a broker can make a difference when buying in Melbourne’s West.
Common Mistakes That Reduce Borrowing Power
-
Overestimating Income: Banks apply conservative benchmarks. Don’t assume your gross salary equals borrowing capacity.
-
Ignoring Expenses: Living costs, school fees, and lifestyle spending matter.
-
Relying Only on One Bank: Direct bank applications can limit your options.
-
Not Considering LVR Flexibility: Smaller deposits may still be viable with the right lender and insurance options.
Next Steps for Home Buyers in Melbourne’s West
-
Get Pre-Approved: Understand your borrowing power before house hunting.
-
Plan Your Deposit & Expenses: Track all expenses to improve your borrowing capacity.
-
Consult a Broker: A local mortgage broker can optimise your borrowing power and save you money.
CTA / GBP Integration: Check my reviews or find more info on my Google Business Profile.
📞 Ready to see how much you can borrow? Contact me via the Contact Page or call 0401 545 302 for a free consultation.
