Maximum percentage of income for mortgage
Discover the Debt-to-Income Ratio (DTI) and how Australian lenders calculate the maximum mortgage amount you can afford based on your income. Get expert insights.
Maximum Percentage of Income for Mortgage | Avoid Overstretching
Discover the maximum income percentage you should spend on a mortgage. Stay within safe limits and protect your financial health.
MORTGAGE PERCENTAGE
How lenders calculate your maximum mortgage limit?
Lenders determine how much you can borrow by assessing your income, living costs and existing debts. The key tool they use is the Debt-to-Income (DTI) ratio, paired with a serviceability test that applies a higher “buffer rate” to ensure you can still afford repayments if rates rise. What lenders evaluate:
Income level and stability
Existing debts, including credit limits
Number of dependants
Living expenses (based on benchmarks like HEM)
The objective is to confirm you can manage your mortgage comfortably. HeyNest brokers help you understand your true borrowing limit and structure your application to strengthen approval outcomes.
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Understanding Debt-to-Income (DTI) rules
DTI guidelines help lenders assess your repayment capacity and protect borrowers from financial strain. Higher ratios usually mean stricter requirements, while lower ratios open access to better loan options and more competitive rates. Why DTI matters:
Legal responsibility: Lenders must ensure loans are suitable for borrowers.
Risk management: Higher debt levels increase the likelihood of repayment difficulty.
Market stability: Industry regulations influence how much lenders can safely approve.
DTI is more than a simple multiplier. HeyNest brokers compare lender policies to help you maximise your borrowing power responsibly.
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Factors that can safely increase your borrowing capacity
There are strategic ways to increase your borrowing capacity without taking unnecessary risks. By improving your financial profile, lenders view you as a low-risk applicant, which can increase approval amounts and access to better loan products. Practical steps that help:
Reduce or cancel unused credit limits
Consolidate high-interest debts
Increase your deposit to lower LVR
Show consistent savings behaviour
Choose lenders with flexible policies for your profile
With the right guidance, you can borrow more without compromising financial security. HeyNest connects you to independent brokers who know which lenders offer flexibility and negotiate the best terms based on your situation.
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Frequently asked questions
What is the average DTI ratio for a home loan in Australia?
There is no official published "average," but many banks apply stricter scrutiny for DTI ratios exceeding 6:1 or 7:1.
Does closing my credit card immediately increase my borrowing capacity?
Yes, because lenders assess your maximum limit as a debt, regardless of the current balance. Closing it removes this liability entirely.
How long does a lender use the 'stress test' interest rate for?
The stress test rate (buffer rate) is only used for the serviceability assessment at the time of application, not for calculating your actual repayments.
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