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Frequently asked questions

Working out how much you could borrow is an important part of choosing your new home and home loan. You need to know how much you comfortably afford to repay, given your other expenses and without impacting your lifestyle too much.

Our affordability and maximum home loan calculators can help you work this out. 

Affordability Calculator

This calculator helps you work out how much you can afford to borrow. Calculate how much you’d be happy to pay by adding up all of your expenses like school fees, utility bills and debt repayments. You don’t need to add your current rent/accommodation costs if you’ll be living in your new home. Subtract your expenses from your income to find out what you could repay.
 

Tip: Consider whether your new home could cost more to live in (for example if interest rates rise or it’s a bigger house with larger heating bills than you’re used to). It’s a good idea to round up your current expenses figure so that you have a buffer for unexpected costs. 

Maximum Loan Calculator

This calculator helps you work out the most you could borrow from the bank to buy your new home. This is called your borrowing power.  Think of it as a maximum borrowing power calculator, helping you work out what a bank takes into consideration to ensure you could repay your home loan and meet your other outgoings. You’ll need to know your income before tax as well as your expenses.

These are terms that lenders use to describe how much you might be able to borrow, based on your financial situation. 

When it comes to home loans, things that affect your borrowing power include how much you earn, current debt repayments (like your credit card limits, or personal loans), number of dependants, how much you’ve saved as a deposit, and whether you have a guarantor.

It also depends on what you spend your money on day-to-day (living expenses). Lenders will consider things like school fees, utility bills, rent, as well as your entertainment and grocery spend, to ensure you’re able to realistically meet your home loan repayments over the life of the loan.

How can I increase my borrowing power?

There are some things that may help increase your home loan borrowing capacity:

  • Reduce your credit limit on credit cards, or close any unused credit cards 
  • Pay down debts, like personal loans
  • Keep a good credit score
  • Split your liabilities with a partner if you’re borrowing on your own
  • Start or keep saving to demonstrate a good savings history.

You might also be able to increase the amount you can borrow by asking a family member to guarantee all or part of your loan. At Westpac, this is called a Family Security Guarantee and it could help you get into the market quicker.

What if I'm self-employed or a business owner?

Employment status can have an influence on your borrowing power, as it might be more complex to demonstrate your income if you’re in this position, and don't always have a regular salary for example. 

Every situation is different, and a home loan specialist can guide you on next steps.

Your limit on other debts, like credit cards and personal loans, might affect your borrowing power. Even if you’ve paid your credit card off completely, your home lender will still look at these limits as potential debt, which affects how much they’ll be willing to lend you.

Your history of repayments on debts can also come into play – called your credit score (or credit rating). Credit reports look at how much you’ve borrowed in the past, previous applications for credit and if you’ve missed payments on things like credit cards, bills or personal loans. 

Check your credit score and download a copy on the government’s MoneySmart website, before applying. If it’s not as strong as it could be, focus on paying down personal loans and credit cards or closing loan and credit accounts that you’re not using.

How do I calculate total credit card and overdraft limits?

Simply check your account statements or online banking dashboard. Each credit card and account with an overdraft should display a credit limit alongside the amount you’ve already borrowed from that credit account. If your bank doesn’t display overdraft limits online or in statements, give them a call and ask. 

An accurate summary of all your credit and overdraft accounts will help your lender process your application faster when you apply.

Before you learn how principal and interest home loan repayments differ from interest-only home loan repayments, you need to understand that a home loan balance is made up of two parts:

  • The principal is the amount that you’ve borrowed with the home loan
  • The interest is an amount your lender charges you based on your principal. It’s calculated daily as a percentage (your interest rate) of your principal and added to your balance every month.

Principal and interest home loan repayments help to pay down both the principal and interest charges on your home loan. This helps you reduce the principal with every repayment, which means you pay less and less interest over time.

If you choose interest-only repayments, you are only paying off the interest charges on your home loan – and not paying down the principal, which is the initial amount you borrowed. Your repayments may be lower with this repayment option, but you will end up paying more interest over time.

Read more about the difference between principal and interest and interest only repayments

While homebuyers tend to think in terms of how much savings/deposit or equity they have and an estimated property price, banks tend to talk about 'LVR' and have their own assessment of the value of the property. 

LVR is the 'loan-to-value ratio' – your loan amount divided by the lender's valuation of the property. It's given as a percentage to guide lenders and homebuyers. 

For example: A $400,000 home loan ÷ $480,000 valuation = 0.83 x 100 (for a percentage) = 83% LVR.

When working out your LVR, remember to base it on the bank’s valuation (if you have one) rather than the price you’re prepared to pay. 

Here's how a difference in your assumed property price and lender valuation can affect the deposit you need:

  • $100k deposit ÷ $500k assumed price = 0.2 (x100 for a percentage) = 20% deposit
  • $100k deposit ÷ $480k bank valuation = 0.21 (x100 for a percentage) = 21% deposit

The type of home loan and the interest rate associated with each type of loan will affect your borrowing power. 

The lower the interest rate, the more you can borrow and the lower any minimum repayment amounts will be. 

Try different values with the calculator above. You may notice that if you stretch the loan term out over a longer period (for example, from 20 years to 30 years) it might mean you can borrow more, however, it will increase the total amount of interest you will end up paying across the life of the loan. 

It's also a good idea to consider your repayments if interest rates were to rise. 

As a current home owner, you may want to consider using equity you’ve built up, to help buy your next home or investment property. Equity is the difference between your property’s current market value, and what you still owe on your home loan. 

Estimate your usable equity with this equity calculator.

What should I count as ‘investment property expenses’?

This can include everything involved in maintaining your investment property. The costs could include strata payments, maintenance expenses, utilities and council rates.

On one hand, you and the person (or people) you’re applying with may have more borrowing power – your collective assets, deposit and income means you may be able to borrow more than a single applicant. But, on the other side of the coin, you may have a greater collective total debt, and this might limit what you can borrow together. 

How do dependants (children) affect my borrowing power?

As with home loans, the responsibility of parenting lasts decades – and so do the associated costs. This is why the number of dependents you support financially plays a role in assessing your borrowing power. 

There are some standard calculations our credit team use to measure the financial impact each dependant can have - these numbers are factored into our home loan calculators. Ask your home loan specialist for more detail about how it's worked out. 

Contrary to popular belief, there is no rough calculation or rule around this. Your salary is certainly an important element in assessing how much you can borrow, but so are a number of other factors. For example, your expenses, credit history, any debt you have and your deposit. Each of these things presents us with information that helps us understand whether you could afford your repayments.

What do you mean by ‘other income’?

This could include bonuses or invoices paid for jobs other than your main one. It could also include interest earned on investments, like other properties or stocks you own.

How much deposit you’ve saved is important as it reduces the amount you need to borrow and the interest you need to pay. It's also important to a lender, as a smaller deposit comes with greater risk. If interest rates rise or unexpected expenses pop up and you’re borrowing at your maximum capacity, you may not be able to meet your repayments.

Typically, if you don’t have a deposit of 20% of the property’s bank valuation, you may need to pay lenders mortgage insurance (LMI)

Lenders mortgage insurance is an insurance cover that protects a lender if you can't meet required mortgage repayments and default on your loan. If you choose to use lenders mortgage insurance to increase your borrowing power, you can choose to add it to the loan balance, though keep in mind this means you’ll pay interest on it.

But if you do the maths and your deposit is simply too small right now, a strategy and a little bit of planning can help you get there. If you're a first home buyer check out this helpful guide to saving for a deposit.

Things you should know

Conditions, credit criteria, fees and charges apply. Residential lending is not available for Non-Australian Resident borrowers.

This information is general in nature and has been prepared without taking your objectives, needs and overall financial situation into account. For this reason, you should consider the appropriateness of the information and if necessary, seek appropriate professional advice. This includes any tax consequences arising from any promotions for investors and customers should seek independent, professional tax advice on any taxation matters before making a decision based on this information.

Key Fact Sheet for Home Loans

 

This calculation is not an offer of credit but an estimate only of what you may be able to borrow based on the information provided and does not include all applicable fees (except for monthly fees). Your borrowing power amount may be different when you complete a full application and we capture all details relevant to our lending criteria. Our lending criteria and basis upon which we assess what you can afford may change at any time without notice. Before acting on this calculation you should seek professional advice.


All interest rates referred to in the calculators are current, as indicated on westpac.com.au. The interest rates represented on this page may include promotional discounts and are subject to change. When assessing ability to service a loan, Westpac may use an interest rate that is higher than the current interest rate for the loan requested.


The output of each calculator is subject to the assumptions provided under each calculator and are subject to change.  The calculator does not take into account any future refinancing options which may be available. The calculator does not take into account any product features, grants or any applicable bank fees.  For details on fees and charges, please go to westpac.com.au


#Comparison rate: The comparison rate is based on a loan of $150,000 over the term of 25 years. WARNING: This comparison rate is true only for the examples given and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate.


^Flexi First Option Home Loans and Investment Loans: Life-of-loan discount is available for new Owner Occupier and Investment Property loans. This includes both Principal & Interest and Interest Only repayments. Offer does not apply to product switches. Interest rates are subject to change. Offer may be varied or withdrawn at any time. 


*Rate Lock: We’ll apply the fixed rate available on the loan settlement date or the date your fixed rate term starts, unless you lock a fixed rate on your loan using our Rate Lock feature. The fixed rate lock-in fee is 0.10% of your loan amount. At the end of the fixed rate term, the interest rate will roll onto our standard variable home loan interest rate, unless a new fixed rate term’s selected and then the fixed rate is determined two business days before the end of the fixed term.


+LVR stands for the loan-to-value ratio. LVR is the amount of your loan compared to the Bank’s valuation of your property offered to secure your loan expressed as a percentage. Home loan rates for new loans are set based on the initial LVR and won’t change during the life of the loan as the LVR changes. 

Weekly and fortnightly repayment calculations – if your monthly repayments are $1000, fortnightly repayments are calculated by dividing $1000 by 2 ($1000 ÷ 2 = $500) and weekly repayments are calculated by dividing $1000 by 4 ($1000 ÷ 4 = $250)


The output or result of these calculators:

  • is subject to the assumptions which are subject to change;
  • is prepared without knowing your personal financial circumstances. Before you act on the output of the calculators, please consider if it’s right for you. If you need more information, please call 1300 786 029.  We recommend that you consult your financial adviser before taking out a loan;
  • does not represent either a quote or pre-qualification for a loan;
  • may not be taken into account if you apply for a loan with us as we will make our own calculations. When assessing ability to service a loan, Westpac may use an interest rate that is higher than the current interest rate for the loan requested.

The interest rates used in the calculator:

  • are current, as indicated on our home loan interest rate pages;
  • are Westpac's standard interest rates and include any package or promotional discounts; and
  • are subject to change.