Written by: Alex Pagonis

Read time: 3 minutes

Last updated: 21 November 2024

These calculations are rough estimates (e.g., borrowing = 5x salary) to help you understand the process. Use them as a guide before diving into the details with a broker.

The Game Plan

You can write clean code and debug like a pro, but buying your first home? That’s a whole different kind of problem-solving. If the mortgage process feels more confusing than a spaghetti-coded legacy system, don’t stress—we’re breaking it down, no jargon, no fluff. Let’s get you from late-night deploys to kicking back in your own place.

The Blueprint

1. Assessing Your Borrowing Capacity

Think of your borrowing capacity as your program's memory limit—go over, and things crash. Here's how to calculate it:

• Base Salary: $150,000 (nice!)
• Vested Shares: $20,000 in Year 1 and $35,000 in Year 2. Average that to $27,500. Lenders might consider about 80% of this, so let's call it $22,000.
• Total Assessable Income: $150,000 + $22,000 = $172,000
• Borrowing Capacity: Lenders typically multiply your income by 5-6. So, $172,000 × 5 = $860,000

But that’s just the starting point. Like a rogue semicolon breaking your code, a few other factors can mess with your borrowing power—so let’s break them down.

• HECS/HELP Debt: That degree wasn't free, and lenders know it. A $20,000 HECS debt might reduce your borrowing capacity by around $50.000 - $90,000 (depending on your salary as it scales). Ouch.
• Credit Card Limits: Even if you only use your card for those sweet frequent flyer points, lenders assume you could max it out. A $15,000 limit could knock off another $90,000 (i.e. 6x credit limit).

After these deductions, your borrowing capacity might be closer to $680,000. Not too shabby!

2. Understanding Property Prices