Understanding how the various everyday Australian systems work is difficult and settling into a home, especially if you plan to buy, can be a daunting process.

To purchase a home in Australia you must follow quite a structured process and one of the most complicated (and often very stressful) parts of this process can be organising your finance. It important to speak to a mortgage broker that intrinsically understands the unique set of challenges a migrant goes through when setting up a new home.

The right loan amount – how much should I borrow?

‘How much can I borrow?’  Is one question just about every client thinks to ask!

But it’s not the right question. A better one is ‘How much should I borrow?’ And this is where a good broker can be of most help – to ensure you understand the right loan amount for your individual needs.

The risk in choosing the wrong loan amount

It’s a scenario that plays out all too often – people overextending on a purchase with a ‘buy now and worry about the consequences later’ mentality. It causes a great amount of financial pressure and stress; all of it unnecessary.

While banks have measures in place to avoid borrowers overextending, they’re still in the business of making money … by lending it to you!

A suitable home loan is measured by the balance between:

  1. Being able to purchase a property, and
  2. Being able to comfortably meet the repayments

Steps to working out right loan amount

Loaning up to your maximum borrowing power will always be a risk if you are not familiar with your cash flow. To familiarise yourself, pick a 6 to 12 month period and review your cash flow over that time. Then realistically ask yourself these questions:

  • How much do you need to maintain the lifestyle you want?
  • Do you have a safety net of savings (a store of a few months’ worth of loan repayments in case something happens and you can’t make one or two)?
  • Will you have any major life changes in the foreseeable future (ie starting a family, changing careers)?
  • Do you have to significantly change your lifestyle to take on the loan? If so, are you up for making those sacrifices?
  • What would happen if interest rates rose by 1 or 2%?

Over-borrowing causes immense stress. You end up spending more time wondering how you’re going to pay your mortgage each month, than enjoying the beautiful property you’ve worked hard to purchase!

A good mortgage broker is indispensable in helping you determine the right loan amount for you.

Boutique Mortgage Broking business, Professional Partners was established in 2004, by business partners Sean and Craig, both migrants from South Africa, one an accountant the other an actuary. They encountered a number of challenges when adapting to life in Australia and would love to make life a little easier for others.

For an obligation free chat, you can contact them via