How Much Can I Borrow for a Home Loan in Victoria as a First-Home Buyer?

By Lowest Interest Rates Australia

Introduction

I’ll never forget the first time I sat down with a calculator and started crunching the numbers for buying my first home. I had my coffee, my notepad, my dreams — and then my jaw hit the floor. “Wait, how much can I actually borrow?” I muttered, doing the mental gymnastics of income, expenses, and that seemingly magical thing called ‘borrowing power.’

If you’ve been wondering the same thing, you’re not alone. Every first-home buyer in Victoria asks this question at some point, and the answer isn’t as simple as punching a number into Google’s home loan calculator. Your borrowing capacity depends on everything from your income and debts to your lifestyle and even the type of loan you choose.

In this guide, we’ll take a deep dive into how lenders work out your borrowing power, what you can realistically expect as a first-home buyer in Victoria, and how you can boost your loan amount without breaking the bank. By the end, you’ll have a clearer picture — and hopefully, a little less stress — about how much home you can really afford.

Table of Contents

1. Understanding Borrowing Power
2. Key Factors That Affect How Much You Can Borrow
3. How Your Income Impacts Your Borrowing Capacity
4. How Expenses and Debts Reduce Your Borrowing Power
5. The Role of Interest Rates and Loan Terms
6. Government Grants and Schemes That Can Boost Your Budget
7. Using Borrowing Calculators: Helpful, But Not Perfect
8. Example: Typical Borrowing Power for a Victorian First-Home Buyer
9. Tips to Increase Your Borrowing Capacity
10. Why Talking to a Mortgage Broker Makes All the Difference
11. Final Thoughts – Start Your Home Loan Journey with Lowest Interest Rates

Understanding Borrowing Power

Your borrowing power (or borrowing capacity) is the maximum amount a lender is willing to lend you for a home loan. It’s based on your financial situation — essentially, how much money comes in versus how much goes out each month. Lenders use this calculation to ensure you can comfortably repay your loan, even if interest rates rise.

In Victoria, property prices can vary widely depending on where you buy. So, knowing your borrowing limit helps you set a realistic budget — whether you’re eyeing a cosy apartment in Brunswick, a townhouse in Geelong, or a family home in Ballarat.

Most lenders calculate your borrowing power by analysing your:

• Income (salary, bonuses, rental income, etc.)
• Living expenses (food, transport, utilities, entertainment, etc.)
• Existing debts (credit cards, car loans, student loans)
• Deposit size
• Interest rate and loan term
• Dependents and household composition

Key Factors That Affect How Much You Can Borrow

Let’s break down the main elements that influence how much you can borrow for your first home in Victoria.

1. Your Income

Your income is the starting point for all calculations. Lenders look at your gross income (before tax) and assess whether it’s stable and consistent. If you’re a full-time employee, that’s simple. But if you’re self-employed, on a contract, or working multiple jobs, lenders may require extra documentation to verify your earnings.

2. Your Expenses

Lenders also analyse your living costs — from groceries and rent to childcare and Netflix subscriptions. The lower your regular expenses, the higher your potential borrowing amount.

3. Existing Debts

Credit cards, personal loans, and car finance all impact your borrowing power. Even unused credit card limits count against you because they represent potential debt.

4. Deposit Size

The bigger your deposit, the smaller the loan you’ll need — and the better your chances of approval. A 20% deposit is ideal, but thanks to government schemes, you can get started with as little as 5%.

5. Interest Rate

The higher the interest rate, the smaller the loan amount you can afford. When rates rise, your monthly repayment increases, which reduces your borrowing capacity.

6. Loan Term

Most home loans in Australia run for 25–30 years. Extending the term slightly can lower your repayments, which might increase your borrowing power — but you’ll pay more interest over time.

How Your Income Impacts Your Borrowing Capacity

Income is the foundation of your borrowing power. Lenders typically allow your total monthly loan repayments (including any debts) to be around 30–40% of your gross monthly income. They also apply a “stress test” — checking that you could still afford repayments if interest rates rose by 3% or more.

Let’s look at an example:

• Annual income: $90,000
• Estimated monthly income after tax: ~$6,000
• Average lender repayment capacity: 35% of income = $2,100/month

At a 6% interest rate over 30 years, this borrower might be approved for roughly $420,000–$450,000, depending on other financial factors.

If there’s a second income (e.g., a couple earning $150,000 combined), the borrowing capacity could jump to around $700,000–$750,000.

How Expenses and Debts Reduce Your Borrowing Power

Lenders assess your household spending in detail — often using both your declared expenses and data from your bank statements. They’ll also use benchmarks like the Household Expenditure Measure (HEM) to ensure your spending expectations are realistic.

Let’s say you earn $90,000 a year but spend $3,000 per month on bills, food, and entertainment. The lender may adjust your borrowing power down because there’s less disposable income left for repayments.

Here are some examples of what can lower your capacity:

• High credit card limits (even if unused)
• Car loans or personal loans
• Dependents (children increase household costs)
• High rent or living expenses
• Multiple buy-now-pay-later accounts

Paying off smaller debts or lowering credit limits before applying can significantly increase how much you can borrow.

The Role of Interest Rates and Loan Terms

Interest rates have a major impact on borrowing power. When rates rise, your repayments increase — and lenders reduce your loan approval amount to reflect that.

For example, at 6% interest, a $500,000 loan over 30 years would cost about $3,000 per month in repayments. But if rates drop to 5%, your repayments would fall to around $2,685. That $315/month difference could increase your borrowing capacity by tens of thousands of dollars.

Similarly, extending your loan term from 25 to 30 years reduces monthly repayments, boosting borrowing power — though it means paying more total interest over time.

Government Grants and Schemes That Can Boost Your Budget

As a first-home buyer in Victoria, you’re not just relying on your income and savings. There are several government schemes designed to help you stretch your budget further.

1. First Home Owner Grant (FHOG)

If you’re buying or building a new home valued up to $750,000, you could receive a $10,000 grant (or more in regional areas). This can effectively add to your deposit and reduce the amount you need to borrow.

2. First Home Guarantee (FHBG)

This federal program lets eligible buyers purchase a home with as little as a 5% deposit without paying Lenders Mortgage Insurance (LMI). That means you can enter the market sooner and borrow more safely.

3. Victorian Stamp Duty Concessions

First-home buyers purchasing a property under $600,000 may pay no stamp duty. Homes between $600,000 and $750,000 attract a concession. That’s thousands in savings you can put toward your deposit or loan repayments.

Using Borrowing Calculators: Helpful, But Not Perfect

Online calculators can give you a general idea of how much you might be able to borrow — but they’re not gospel. Each lender uses its own formula and risk assessment model. One bank might approve you for $550,000 while another caps you at $480,000.

Borrowing calculators also can’t accurately factor in every detail of your financial life — like side income, bonuses, or discretionary spending. They’re a good starting point but not a final answer.

For the most accurate estimate, a mortgage broker can perform a personalised borrowing capacity assessment using real lender data and updated rate policies.

Example: Typical Borrowing Power for a Victorian First-Home Buyer

Let’s look at a few realistic examples of what first-home buyers in Victoria might be able to borrow in 2025.

Example 1: Single Buyer

• Income: $80,000 per year
• Monthly expenses: $2,000
• No debts
• Deposit: $40,000 (5%)

Estimated borrowing power: Around $420,000–$460,000

Example 2: Couple

• Combined income: $150,000 per year
• Monthly expenses: $3,000
• Small car loan ($10,000 remaining)
• Deposit: $60,000 (8%)

Estimated borrowing power: Around $700,000–$760,000

Example 3: Family with One Child

• Combined income: $130,000
• Monthly expenses: $3,500
• Credit card limits: $10,000
• Deposit: $70,000

Estimated borrowing power: Around $600,000–$650,000

As you can see, small differences in income, expenses, or debt levels can shift your borrowing capacity by tens (or even hundreds) of thousands of dollars.

Tips to Increase Your Borrowing Capacity

Ready to borrow more without overextending yourself? Here are some proven ways to boost your borrowing power as a first-home buyer:

• Pay down existing debts: Clear personal loans and reduce credit card limits to improve your debt-to-income ratio.
• Track and reduce spending: Lenders scrutinise bank statements — cutting unnecessary expenses boosts your disposable income.
• Save a larger deposit: A 10%–20% deposit not only increases borrowing options but can unlock lower interest rates.
• Consolidate debts: Fewer monthly repayments simplify your finances and can make your profile more attractive to lenders.
• Choose a longer loan term: Extending to 30 years can lower repayments, slightly increasing borrowing capacity (but remember, you’ll pay more interest overall).
• Get expert advice early: A mortgage broker can identify which lenders will offer you the most favourable terms based on your profile.

Why Talking to a Mortgage Broker Makes All the Difference

Here’s the thing — your borrowing power isn’t set in stone. Every lender uses different assessment criteria, and a good mortgage broker knows how to match your financial situation to the right lender to maximise your loan amount.

In Melbourne and across Victoria, brokers have access to dozens of banks, credit unions, and non-bank lenders. They can instantly compare products, rates, and eligibility rules to give you a realistic borrowing range. Best of all, their services are usually free — because lenders pay them a commission when your loan settles.

So instead of guessing or relying on outdated online calculators, you can have a professional run the numbers accurately and show you which loan structures will give you the most borrowing power.

Final Thoughts – Start Your Home Loan Journey with Lowest Interest Rates

So, how much can you borrow for a home loan in Victoria as a first-home buyer? The short answer: it depends on your income, expenses, and financial habits — but with the right guidance, it could be more than you think.

Understanding your borrowing power early helps you plan smarter, set realistic goals, and avoid disappointment later. And that’s where expert help makes all the difference.

The team at Lowest Interest Rates specialises in helping first-home buyers across Victoria discover exactly how much they can borrow, which lenders will offer the best deals, and how to make your loan application shine.

Visit LowestInterestRates.com.au today to get personalised advice, compare loan options, and start your home-buying journey with confidence — knowing exactly what you can afford and how to make it happen.