Home loan affordability: everything you need to know

Excited family entering their new home

In order to make sure the mortgage you commit to now will still be affordable in the future, no matter what life throws your way, it’s a good idea to be cautious  when it comes to estimating your repayments. 

For example, it may not be the best idea to borrow the maximum amount that a lender is willing to offer you. Here are a few things to consider: 

Tally up all the costs of buying a home

1. Tally up all the costs of buying a home

The costs of buying a home don't begin and end with the mortgage. As well as being able to successfully save for a house deposit, it’s important to be aware of all the fees involved in buying a home before and after your loan settles.

Outside of a mortgage, stamp duty is likely to be one of the biggest costs you’ll have (it varies from state to state) and is usually paid upon settlement of the loan.

In addition, other one-off fees include loan establishment fee, title protection and legal fees, as well as mortgage insurance fees (if applicable). You may also want to get a building inspection carried out on the property before you buy.

The costs of buying a home don't begin and end with the mortgage.


If the amount you're borrowing is greater than an 80% loan-to-value ratio (LVR), then you may be required to pay Lender’s Mortgage Insurance (LMI) – this is a risk fee that typically costs circa 2% of the total price of your home. So the more money you save for a house deposit, the more you can afford to borrow without having to pay LMI.

There are also other ongoing costs to be taken into account when you’re a home owner including body corporate or strata fees, council rates, utilities or insurances. Find out more about our home loan fees.

These are all predictable expenses and it’s important to closely look at what you can realistically afford to repay each month. It also means you’ll avoid surprises down the line.

To get you started, use our Home Loan Repayments calculator as a guide to what your repayments could be on your new home loan.

Consider changing circumstances

2. Consider changing circumstances

Whether you love to travel, are thinking of starting your own business or want to start or grow your family, you shouldn’t have to let home loan repayments dictate those life choices. Build in buffer now so you have more flexibility as things change.

Think about your plans for:

  • Family - children create additional expenses, plus you're more likely to be living in on one income instead of two for a period of time.
  • Career - are you dreaming of going back to study? Or a career change? Factor in the short-term impact this could have on your current income.
  • Renovations - is the house a fixer-upper? Or will you want to make your own mark on the place down the track? Be sure to include potential renovation costs and how you plan to finance them.
  • Interest rate changes - a variable rate may shift with market changes, while fixed rates are the same for a specified period. Lenders consider your ability to repay the loan at a higher rate when determining how much they will lend you, but it’s also a good idea for you to decide how comfortable you would feel if rates go up again as it can impact your monthly home loan repayments. Learn the difference between variable and fixed interest rates.
  • Safety nets - insurance premiums, such as income protection, may add to your monthly costs but they also give you confidence you can always make your repayments no matter what happens in life.

Remember: When deciding on a home loan, it is also important to compare the types of home loan features available that might support your changing needs in the future. For example, repayment options, redraw facility and offset account are some of the most popular options that will give you flexibility in managing your cash flow should your situation change.

Learn about Pepper Money’s home loan features.

Be realistic about your expenses

3. Be realistic about your expenses

How do you imagine life will be once you have a mortgage? Do you love dining out, going to the movies? Or have regular subscriptions you can’t live without?

It’s fine if you intend to continue your lifestyle, as long as you’re realistic with yourself. With a little planning, many people can afford a home loan without completely giving up their lifestyle. These handy budgeting tips could help help you stay on track with your finances.

Work out the must-haves and nice-to-haves before you commit to a mortgage, and you will be prepared both emotionally and financially for this next exciting stage of life.

It’s also a good idea to speak to a financial adviser to make sure the amount you are looking to borrow is in line with your current situation and financial goals.

Ready to get started? 

Try our online borrowing power calculator to see what repayments could look like on a Pepper Money home loan and how much you may be able to borrow. 

Apply for a Pepper Money Home Loan

Want to find out where you stand?

We've got the online tools and calculators to help get your home loan journey underway. Work out how much you may be able to borrow and even quickly find out what indicative interest rate you might be eligible for.

Information provided is factual information only and is not intended to imply any recommendation about any financial product(s) or constitute tax advice. If you require financial or tax advice you should consult a licensed financial or tax adviser.

All applications are subject to credit assessment, eligibility criteria and lending limits. Terms, conditions, fees and charges apply. 

The results of the borrowing power calculator are based on information you have provided and is to be used as a guide only. The output of the calculator is subject to the assumptions provided in the calculator (see 'about this calculator') and are subject to change. It does not constitute a quote, pre-qualification, approval for credit or an offer for credit and you should not enter commitments based on it. The interest rates do not reflect true interest rates and the formula used for the purpose of calculating estimated borrowing power is based on the assumption that interest rates remain constant for the chosen loan term. Your borrowing power amount will be different if a full application is submitted and we complete responsible lending assessment. The results in the calculator do not take into account loan setup or establishment fees nor government, statutory or lenders fees, which may be applicable from time to time. Calculator by Widgetworks.

Pepper Money Personal Loans is a brand of Pepper Money Limited. Credit is provided by Now Finance Group Pty Ltd, Australian Credit Licence Number 425142 as agent for NF Finco 2 Pty Limited ACN 164 213 030. Personal information for Pepper Money Personal Loans is collected, used and disclosed in accordance with Pepper’s Privacy Policy & the credit provider’s Privacy Policy.

Pepper Money Limited ABN 55 094 317 665; AFSL 286655; Australian Credit Licence 286655 (“Pepper”). All rights reserved. Pepper is the servicer of home loans provided by Pepper Finance Corporation Limited ABN 51 094 317 647. Pepper Asset Finance Pty Limited ACN 165 183 317 Australian Credit Licence 458899 is the credit provider for asset finance loans.

Pepper and the Pepper Money logo are registered trademarks of Pepper Group Assets (Australia) Pty Limited and are used under licence.

Get in touch with a Lending Specialist

Tell us about your situation. The more we learn, the better we can help.