How Much Should You Borrow for Your Home? Don't Forget About the Life You Want to Live.

Buying a home? Here's how to work out a comfortable mortgage repayment without sacrificing your lifestyle or future financial goals.

When you're preparing to buy a home, one of the first questions you'll probably ask is:

"How much can I borrow?"

But there's another question I think is even more important:

"How much can I comfortably borrow without sacrificing the lifestyle I want to live?"

One of the biggest mistakes I see home buyers make is committing too much of their income to mortgage repayments, without considering the other things they'll want to afford over the coming years.

Things like replacing the family car, taking overseas holidays, or having children and navigating a temporary reduction in household income.

Because while buying a beautiful home is important, you also want to be able to afford to enjoy your life once you've moved in.

Here's how to determine a home loan amount that balances both.

Step 1. Start With the Lifestyle You Want to Afford

Before deciding how much you'd like to borrow, take a look at your current household budget.

But don't just consider what you're spending today. Think about the lifestyle you want to be able to afford over the next five to ten years.

For example:

• Cars: Will you need to replace your car in the next few years? Would you like to upgrade to a newer vehicle without having to take out a large car loan?

• Holidays: Do you want to take an overseas holiday every year or two? How much would you ideally like to spend?

• Family plans: Are you planning to have children, pay for private schooling or reduce your working hours?

• Home improvements: Would you like to renovate, furnish your home or make other significant purchases?

• Savings and investments: Do you want to continue building wealth outside of your family home?

These are all expenses that can be easy to overlook when you're focused on buying a property.

And while you might be able to afford a larger mortgage today, you don't want to find yourself earning good money but unable to afford anything else with it.

Don't Forget to Budget for Big-Ticket Purchases

One approach I recommend is to work out how much you'd like to set aside each month for future expenses.

For example:

Future Expense	Savings Goal	Monthly Savings
Replace your car in 5 years	$30,000	$500
Overseas holiday every 2 years	$12,000	$500
Home improvements in 5 years	$15,000	$250
Total		$1,250/month

These are illustrative amounts. Your own savings goals will depend on your circumstances.

In this example, you'd ideally want to have $1,250 available each month for future purchases, on top of your regular living expenses and mortgage repayments.

That could make a significant difference to the loan amount you're comfortable taking on.

The goal isn't to sacrifice buying the home you want. It's to make sure you can still afford the other things you want in life once you've bought it.

Step 2. Planning to Have Children? Be Particularly Careful With Your Mortgage Budget

One of the biggest mistakes I see young couples make is taking out a large mortgage based on their current household income, without considering how their finances might change when they have children.

For many families, the early years of parenthood can be some of the most financially challenging.

You might go from two full-time incomes to one income for a period of time. Then, when you return to work, you could be managing significant childcare expenses, potentially while working reduced hours.

Suddenly, the mortgage repayments that felt perfectly manageable a few years earlier can become a significant financial burden.

My advice? If you're planning to have children in the next few years, don't calculate your comfortable mortgage repayment based solely on what you can afford today.

Consider what your household income and expenses might look like during parental leave and the childcare years.

For example, if you're currently earning $200,000 between you, but expect your household income to temporarily drop to $120,000, would you still feel comfortable with the mortgage you're considering?

And remember, these are also years when you'll likely want to enjoy spending time with your young family.

You don't want to find yourself having to give up the little things, like your daily coffee or weekend outings with your children, simply because you've stretched yourself too far on your mortgage.

Buying a beautiful family home is a wonderful goal. But so is having the financial freedom to enjoy your life inside and outside of it.

Step 3. Work Out What You Can Comfortably Afford to Repay

Now that you've considered your current lifestyle and future financial goals, it's time to put some numbers around your mortgage.

Take your monthly household income and subtract your regular living expenses, savings goals and the money you'd like to set aside for future purchases.

Remember to allow for the additional costs of homeownership, including council rates, insurance and property maintenance.

What's left will give you an indication of how much you could comfortably allocate towards your mortgage each month.

What Does Your Comfortable Repayment Mean for Your Loan Amount?

Let's assume you're taking out a 30-year home loan with an interest rate of 6%.

Loan Amount	Monthly Repayment
$500,000	$2,998
$600,000	$3,597
$700,000	$4,197
$800,000	$4,796
$900,000	$5,396
$1,000,000	$5,996

Approximate principal and interest repayments, assuming a constant 6% interest rate over 30 years.

For example, if you've reviewed your budget and decided you're comfortable spending around $4,500 per month on your mortgage, you might determine that borrowing approximately $750,000 would suit your circumstances.

Of course, your actual repayments will depend on the interest rate and loan term available to you.

Your next step: Use our Mortgage Repayment Calculator to explore different loan amounts and find a monthly repayment that works for your budget.

Step 4. Consider What Happens if Interest Rates Increase

One final thing I'd encourage you to consider is whether you'd still feel comfortable with your mortgage if interest rates increased.

For example, on a $750,000 home loan over 30 years:

Interest Rate	Monthly Repayment
6.0%	$4,497
6.5%	$4,741
7.0%	$4,990

Figures are approximate and assume principal and interest repayments over 30 years.

A 1% increase in your interest rate could add almost $500 to your monthly repayments.

While nobody can predict exactly where interest rates will go, allowing some flexibility in your budget can help you manage changes without significantly affecting your lifestyle.

If you're particularly concerned about interest rate movements, you may also want to explore whether a fixed interest rate could provide greater repayment certainty.

So, How Much Should You Borrow?

Ultimately, the right loan amount is one that allows you to purchase a home you're happy with, without compromising the lifestyle you want to maintain.

And that includes more than just your everyday living expenses.

It means being able to replace your car when you need to, take holidays, enjoy time with your family and continue working towards your other financial goals.

Because there's not much point buying your dream home if the mortgage repayments mean you can't afford to enjoy the rest of your life.

For some people, that means borrowing close to their maximum borrowing capacity. For others, it means choosing a smaller mortgage to maintain greater financial flexibility.

Neither approach is necessarily right or wrong.

What's important is that you're making the decision intentionally, with a clear understanding of how your mortgage repayments will fit into your life.

Ready to Find Out Whether Your Desired Loan Amount Is Achievable?

Once you've worked out how much you'd ideally like to borrow, the next step is finding out whether a lender will approve you for that amount.

That's where I come in.

At Oren Mortgages, I'll assess your borrowing capacity across different lenders to determine whether your desired loan amount is achievable.

If it isn't, we can explore your options and work towards a realistic borrowing amount that supports your property goals.

Book a Borrowing Clarity Call to discuss your desired loan amount and find out what's possible.

General information only. This article does not constitute personal financial advice. Loan eligibility, borrowing capacity and repayments depend on individual circumstances and lender policies.