Percentage of Income for Mortgage | What’s Recommended?

How lenders calculate your borrowing capacity?

Australian lenders use strict assessments to determine how much you can borrow, ensuring your repayments remain manageable over time. They evaluate your ability to meet future loan commitments, not just your current financial position. What lenders look at:

• Income: Reliable gross earnings used to determine repayment ability.

• Existing debts: Credit cards, loans and other liabilities reduce capacity.

• Living expenses: Estimated using benchmarks that vary by household size and location.

• Stress testing: Applications are calculated using a rate above current market conditions.

Each lender applies its own formula, so borrowing capacity can differ widely. HeyNest connects you with an independent broker who compares these formulas across multiple lenders to find the highest achievable borrowing capacity for your profile.

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The ideal percentage of income for mortgage repayments

A sustainable repayment amount protects your lifestyle, savings goals and long-term financial independence. Borrowers should consider a more conservative target than the maximum a bank may approve. How to stay within a healthy range:

• Increase your deposit: Reduces the total borrowed and lowers repayments.

• Reduce high-interest debt: Frees up disposable income and strengthens eligibility.

• Consider loan term options: Longer terms can lower the required regular payment.

• Stress-test your budget: Ensure you can manage potential increases over time.

Approval doesn’t automatically mean affordability. HeyNest brokers aim for repayments that align with your personal comfort and financial goals, not just the lender’s limits.

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Finding the best loan within your income limits

Securing approval is only the first step; choosing the right loan structure determines whether your mortgage supports or restricts your lifestyle. A competitive structure keeps repayments manageable within your chosen percentage. Features that reduce financial pressure:

• Competitive interest rates: Lower rates reduce repayment size over the life of the loan.

• Offset accounts: Reduce interest by linking savings to your mortgage.

• Flexible repayment options: Allow extra repayments or changes in structure without penalties.

Comparing banks alone can lead to higher repayments and fewer options. HeyNest connects you to a broker who works exclusively for you, negotiates better rates and ensures your loan fits comfortably within your income limits.

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Frequently asked questions

What is the DTI ratio?

The Debt-to-Income (DTI) ratio compares your total annual debt payments (including the proposed mortgage) to your gross annual income. Lenders often cap this.

Does HECS/HELP debt count against my income percentage?

Yes, HECS/HELP repayments are treated as a mandatory expense by lenders, effectively reducing your disposable income and your overall borrowing capacity.

Is 30% of my gross income a safe limit for a mortgage?

For many Australians, 30% of gross income is a common, though sometimes tight, threshold. Most experts recommend aiming for under 30% of your net income for maximum comfort.