06 Nov 2022

How Much Can I Borrow with a $50,000 Deposit?

Borrowing Capacity

Potential homeowners who have a $50,000 home loan deposit prepared have the potential to borrow up to $250,000 depending on the individual mortgage broker or lending specialist. Generally, lenders will require a 20% deposit for a home loan, however, this does vary. It is important to remember that most lending professionals recommend their clients spend only 30% of their monthly earnings on housing expenses, which includes mortgage repayments. 

A potential borrower’s ability to borrow their desired loan amount largely depends on their borrowing power. Borrowing power is calculated by an applicant’s mortgage broker or lender using their salary, monthly expenses, yearly interest rate, loan amount, and deposit amount. Calculating borrowing power allows lenders to determine the amount of money an applicant can borrow, their ability to make the required repayments, and their overall risk factor as a borrower. A borrower who is determined to be a low-risk borrower will have a high credit score and good financial history, while a high-risk borrower will have a low credit score and poor financial history. 

It may be helpful for potential home loan applicant’s to work on raising any low credit scores and poor financial histories prior to applying for their desired loan to boost their borrowing power potential. An applicant can also increase their borrowing power by trying out some of the following methods:

  • Decreasing any high credit card limits and closing any unnecessary credit cards
  • Making consistent repayments on bills and debt
  • Adding a guarantor to the home loan
  • Saving for a larger home loan deposit
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