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The 5 Biggest Home Loan Borrowing Capacity Killers

Securing a mortgage is a significant step on the path to homeownership, but the journey is riddled with potential pitfalls that can impact your borrowing capacity. In my capacity as a Perth Mortgage Broker, I've witnessed the subtle yet powerful factors that can make or break your ability to secure that dream home. In this post, we'll delve into the five biggest borrowing capacity killers and how you can help to avoid (or minimise) the impact they may have on your borrowing power.

1. High Limit Credit Cards (even with $0 owing!)

Credit cards, those seemingly innocent pieces of plastic, can have a surprisingly profound impact on your borrowing capacity. Even if you diligently pay off your balance each month, the credit limit itself can be a red flag for lenders. They consider the potential debt you could accumulate at any given time. As a rough guide – every $10,000 in credit card limits can lower your borrowing capacity by about $50,000!

To mitigate this, many clients consider lowering their credit card limits or even closing credit cards altogether!

2. Private Health Insurance

While health insurance is a crucial aspect of financial planning, it's important to understand its implications on borrowing capacity. The premiums you pay for private health insurance are typically viewed by lenders as an additional monthly expense (that sits outside your normal ‘living expenses’). In recent times, I have seen client’s health insurance premiums reduce their borrowing capacity by as much as $35,000!

To strike a balance, it could be worth exploring different health insurance plans to find one that suits your needs without burdening your borrowing capacity. Keep in mind however that this isn’t financial advice and we always recommend that this is worth doing in collaboration with a financial adviser who can help you consider things like inclusions, exclusions and waiting periods etc.

3. Car Loans

Dreaming of a new car to accompany your new home? Be cautious. Car loans, especially those with high monthly payments, can significantly impact your borrowing capacity. Lenders consider these ongoing commitments when determining how much you can borrow for a home. If possible, delay that car purchase until after securing your mortgage or opt for a more budget-friendly option.

4. Rising Interest Rates

Interest rates are a variable that can't be ignored. Even when rates are low, it's crucial to consider the potential impact of rising interest rates on your borrowing capacity. Lenders often stress-test your ability to repay the loan by adding a “buffer” to current rates (usually 3%). Stay informed about market trends and be prepared for your potential borrowing capacity to be reduced if/when rates start to climb – this has been especially relevant throughout 2022/23 in Australia, where rates have climbed consistently over this period.

5. HECS-HELP Loans (Higher Education Contribution Scheme) 

HECS-HELP debts are often overlooked when considering borrowing capacity. Lenders assess your financial commitments, and an outstanding HECS debt can influence how much money they will lend you. While education is a valuable investment, it's crucial to be aware of the impact on your ability to borrow. Factor in HECS repayments when planning for homeownership to ensure a realistic assessment of your borrowing capacity.


In the pursuit of homeownership, knowledge is power. Understanding the ins and outs of the most common borrowing capacity killers empowers you to make informed financial decisions. As you navigate the path to securing a mortgage, remember that professional input from experienced mortgage brokers can be invaluable.

In this complex financial landscape, there's no one-size-fits-all solution. Take the time to sit down with a broker and evaluate your financial situation, consider the potential impacts of each borrowing capacity killer, and make strategic decisions that align with your homeownership goals.

We would love to hear from you! Share your thoughts on borrowing capacity and any experiences you've had in the journey to securing a mortgage in the comments below. If you have specific questions or would like personalised advice, feel free to reach out to our team on 08 9200 4840.


Remember, your dream home is within reach with the right knowledge and guidance.


As Always - the information in this blog post is general only and shouldn't be constituted as advice. Your complete financial situation will need to be assessed before acceptance of any proposal or product.



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