Everything you need to know about home loans, investment lending, SMSF and more — explained in plain English.
Home LoansUpdated April 2025
How Much Can I Borrow for a Home Loan in Australia?
One of the most common questions we get at Loan Worth is "how much can I borrow?" The answer depends on several key factors that lenders assess when evaluating your application.
The main factors that affect your borrowing capacity are:
1. Your Income — Lenders look at your gross (before-tax) income from employment, self-employment, rental income, and other verified sources. Most lenders apply a stress-test assessment rate (currently around 9% p.a.) to ensure you can still make repayments if interest rates rise.
2. Your Existing Liabilities — Outstanding credit card limits (not just balances), personal loan repayments, car loans and HECS/HELP debt all reduce your borrowing capacity. For credit cards, most lenders assess 3.8% of the card's limit per annum, regardless of balance.
3. Living Expenses (HEM) — Lenders use the Household Expenditure Measure (HEM) as a minimum benchmark for living costs. Higher declared living expenses can reduce your capacity.
4. Loan-to-Value Ratio (LVR) — The size of your deposit affects which lenders will consider you and at what rates. Below 80% LVR avoids Lenders Mortgage Insurance (LMI).
5. Credit History — A strong credit score opens more lender options; defaults or missed payments can limit your choices.
The best way to find out your true borrowing capacity is to use our free calculator, which applies the same 9% assessment rate banks use. Your Loan Worth broker will then provide a more precise figure based on your full picture.
First Home Buyer's Complete Guide to Getting a Home Loan in Australia
Buying your first home is one of the most exciting — and overwhelming — financial decisions you'll make. Here's what you need to know to get started on the right foot.
Step 1: Understand Your Borrowing Capacity — Before you start inspecting properties, know your budget. Use our free borrowing capacity calculator or speak to a Loan Worth broker for a detailed assessment. This also helps you determine what deposit you need.
Step 2: Save Your Deposit — Most lenders require at least 5–10% of the property's purchase price as a deposit. With less than 20%, you'll likely pay Lenders Mortgage Insurance (LMI). A 20% deposit avoids LMI entirely and unlocks better interest rates.
Step 3: Check Government Grants — First home buyers in Australia may be eligible for the First Home Owner Grant (FHOG), the First Home Guarantee (previously FHLDS), and various state-based stamp duty concessions or exemptions. Eligibility varies by state and property price — ask your broker what you qualify for.
Step 4: Get Pre-Approved — A formal pre-approval from a lender gives you confidence when making offers. It typically lasts 90 days and tells agents you're a serious buyer.
Step 5: Choose the Right Loan Structure — Fixed vs variable rate, offset accounts, redraw facilities — these choices matter for your long-term financial position. Your Loan Worth broker will explain the pros and cons of each based on your goals.
Documents You'll Typically Need: Recent payslips (last 2), 3 months bank statements, tax return (if self-employed), photo ID, and evidence of your deposit.
Investment Property Loans Australia: What You Need to Know
Investment property lending is one of the most powerful wealth-building strategies available to Australians — but getting the loan structure right from day one is critical.
Interest Only vs Principal & Interest — Many investors opt for interest-only repayments in the early years to maximise cash flow and tax deductions. However, lenders have tightened policies on interest-only terms, so your broker needs to select lenders who will accommodate your investment strategy.
Negative Gearing — If your rental income is less than your loan repayments and property expenses, you're "negatively geared." This creates a tax-deductible loss that can reduce your taxable income. Speak to your accountant about whether this strategy suits your situation.
Loan Structuring for Portfolio Growth — How you set up your first investment loan significantly impacts your ability to purchase future properties. Keeping investment and owner-occupied loans separate, using offset accounts strategically, and maintaining clean loan records all matter.
Borrowing for Investment — Lenders typically apply a rental income "haircut" (accepting only 70–80% of rental income) when calculating serviceability. Your broker needs to know which lenders are most favourable for your specific situation.
At Loan Worth, we specialise in structuring investment loans that don't just get you one property — they position you to keep growing your portfolio.
SMSF Lending: Buying Property Through Your Self-Managed Super Fund
Australians with a self-managed super fund (SMSF) can purchase investment property using a structure called a Limited Recourse Borrowing Arrangement (LRBA). This is one of the most powerful — and complex — property strategies available.
How SMSF Property Borrowing Works — Your SMSF borrows money from a lender to purchase a property. The property is held in a separate "bare trust" until the loan is repaid. If the SMSF defaults, the lender's recourse is limited to the property itself — hence "limited recourse."
What Can You Buy? — Residential investment properties, commercial properties, and rural land can all be purchased through an SMSF LRBA. You cannot purchase a property to live in yourself through your SMSF.
Key Requirements: Your SMSF must have sufficient assets and cash flow to service the loan, meet minimum balance requirements (typically $200,000+), and have a compliant trust deed and investment strategy that allows property investment.
Tax Advantages — Rental income inside an SMSF is taxed at only 15% (or 0% in pension phase). Capital gains are taxed at just 10% if the property is held for more than 12 months. This makes SMSF property investment extremely tax-efficient for the right client.
Important: SMSF lending requires specialist advice from both a mortgage broker and a financial advisor or accountant. Loan Worth's SMSF specialists work closely with your advisory team to ensure your structure is compliant and optimised.
Commercial Finance & Asset Lending: Options for Australian Businesses
Whether you're buying commercial property or financing business equipment, Loan Worth helps Australian businesses access the right funding at the best available terms.
Commercial Property Finance — Commercial loans are assessed differently from residential loans. Lenders focus on the property's rental income, lease terms, tenant quality and LVR (typically 65–75% for commercial). Loan terms are shorter (15–25 years) and rates are generally higher.
Development Finance — For property developers, construction finance is assessed on project feasibility, presales (typically 100% of debt coverage), and builder contracts. This is a specialist area where Loan Worth's commercial team adds significant value.
Asset Finance Options:
Chattel Mortgage — You own the asset from day one. The lender takes a "mortgage" over the asset as security. This is the most common structure for business vehicles and equipment, offering strong tax benefits.
Finance Lease — The lender purchases the asset and leases it to you. At the end of the term, you may have the option to purchase the asset. Useful for preserving working capital.
Novated Lease — A three-way arrangement between you, your employer and a finance company. Salary packaging benefits can significantly reduce the after-tax cost of a vehicle.
Loan Worth works with specialist asset finance lenders to secure competitive rates for vehicles, plant, equipment, technology and more.
Quick answers to the most common questions we receive.
A mortgage broker acts as an intermediary between you and lenders. We assess your financial position, search our panel of 40+ lenders, present suitable options, assist with the application, and manage the process through to settlement. Our service is completely free to you — we're paid a commission by the lender when your loan settles.
A conditional approval (or pre-approval) typically takes 1–5 business days once you've provided all required documents. Full formal approval after finding a property usually takes 5–15 business days. Settlement typically occurs 4–6 weeks after formal approval, though this varies. Loan Worth's proactive approach helps avoid delays at every stage.
LVR is the loan amount as a percentage of the property's value. For example, if you borrow $400,000 to purchase a $500,000 property, your LVR is 80%. Lenders prefer lower LVRs as they represent less risk. Borrowing above 80% LVR typically requires Lenders Mortgage Insurance (LMI), which protects the lender (not you) if you default.
Fixed rate loans offer certainty — your repayments won't change for the fixed period (typically 1–5 years), making budgeting easier. Variable rate loans move with market conditions, and offer more flexibility (extra repayments, offset accounts, no break costs). Many borrowers split their loan — part fixed, part variable — to get the best of both. Your Loan Worth broker will help you decide based on your goals.
Yes! Self-employed borrowers can absolutely get home loans, though the application process differs. Most lenders require 2 years of tax returns and financial statements showing consistent or growing income. Some specialist lenders offer "low-doc" or "alt-doc" loans for self-employed borrowers who can verify income through bank statements or BAS. Loan Worth has strong relationships with lenders who understand self-employment.
LMI is a one-off insurance premium charged when you borrow more than 80% of a property's value. It protects the lender — not you — in the event you default. LMI can be paid upfront or capitalised onto your loan. The cost varies based on the loan amount and LVR but can range from a few thousand to tens of thousands of dollars. Some first home buyer government schemes allow you to avoid LMI with a smaller deposit.
Refinancing means replacing your current home loan with a new one — either with the same lender or a different one. People refinance to get a lower interest rate, access equity, change loan features, or consolidate debts. The key is to weigh the savings against any costs (discharge fees, application fees, potential LMI). Loan Worth offers a free refinance health check to determine whether switching would benefit you.
An offset account is a transactional bank account linked to your home loan. The balance in your offset account reduces the loan balance on which interest is calculated. For example, if you have a $500,000 loan and $50,000 in your offset account, you're only charged interest on $450,000. The more money you keep in your offset, the more interest you save — and the faster you pay off your loan.
While a 20% deposit is ideal (avoiding LMI and unlocking better rates), you can buy a home with as little as 5% genuine savings in many cases. Government schemes like the First Home Guarantee allow eligible buyers to purchase with just 5% deposit and no LMI. Family guarantee loans can also allow parents to use their home equity to help you purchase with a smaller deposit. Your options depend on your situation — ask your Loan Worth broker.
Still Have Questions?
Our brokers are happy to answer any questions obligation-free. Or calculate your borrowing capacity right now.