Borrowing Power on $40,000 Salary
How much you can borrow for a home loan on a $40,000 gross annual salary. Based on bank assessment rates and the 30% serviceability rule.
Last verified: 5 May 2026On a $40,000 salary, you could borrow approximately $121,555
Based on 9.25% assessment rate (6.25% + 3% buffer) and 30% serviceability ratio over 30 years.
Monthly repayment
$748.43
at 6.25% over 30 years
Fortnightly repayment
$345.43
at 6.25% over 30 years
Weekly repayment
$172.72
at 6.25% over 30 years
What $121,555 Buys You
How your $121,555 borrowing power compares to median house prices across Australian capital cities (with a 20% deposit).
| City | Median | Loan needed (80%) | Affordable? |
|---|---|---|---|
| Sydney | $1,150,000 | $920,000 | Short $798,445 |
| Melbourne | $800,000 | $640,000 | Short $518,445 |
| Brisbane | $780,000 | $624,000 | Short $502,445 |
| Perth | $700,000 | $560,000 | Short $438,445 |
| Adelaide | $720,000 | $576,000 | Short $454,445 |
| Hobart | $650,000 | $520,000 | Short $398,445 |
| Canberra | $850,000 | $680,000 | Short $558,445 |
| Darwin | $500,000 | $400,000 | Short $278,445 |
Median prices are approximate mid-2025 figures. Actual prices vary by suburb.
Deposit Needed
How much deposit you need for different property values with $121,555 borrowing power.
| Deposit % | Max property | Deposit | Est. LMI |
|---|---|---|---|
| 5% | $127,952 | $6,398 | $4,254 |
| 10% | $135,061 | $13,506 | $2,188 |
| 20%(no LMI) | $151,943 | $30,389 | $0 |
LMI estimates are approximate. Actual LMI varies by lender, loan amount, and LVR.
Monthly Repayments at Current Rates
| Rate | Monthly | Fortnightly | vs 6.25% |
|---|---|---|---|
| 5.5% | $690.17 | $318.54 | -$58.26/mo |
| 6% | $728.78 | $336.36 | -$19.65/mo |
| 6.25%(current) | $748.43 | $345.43 | — |
| 6.5% | $768.31 | $354.60 | +$19.88/mo |
| 7% | $808.71 | $373.25 | +$60.27/mo |
| 7.5% | $849.93 | $392.27 | +$101.49/mo |
What Reduces Your Borrowing Power
HECS-HELP debt
Compulsory repayments are deducted from income before assessment
Varies
Credit card ($10K limit)
Banks assume 3% of your credit limit as a monthly commitment, even if paid in full
-$36,466
Car loan ($500/month)
Existing debt repayments directly reduce serviceability
-$60,777
Each dependant
Banks add ~$400/month per dependant to living expenses
-$48,622
How to Increase Your Borrowing Power
- Pay off debts first — closing a $10K credit card could add $36,466 to your borrowing power
- Save a bigger deposit — a 20% deposit avoids LMI (saving $4,254) and shows lenders you're a lower risk
- Longer loan term — a 35-year term increases borrowing power to approximately $124,573 ($3,018 more)
- Add a co-borrower — combining incomes significantly increases capacity — see $80K couple
- Reduce living expenses — lower declared expenses mean more income available for repayments
Lenders Mortgage Insurance (LMI)
LMI is required when your deposit is less than 20% of the property value. Here's what you'd pay on a $121,555 loan:
5% deposit (95% LVR)
$4,254
on $127,952 property
10% deposit (90% LVR)
$2,188
on $135,061 property
15% deposit (85% LVR)
$972
on $143,005 property
LMI can often be added to the loan (capitalised), but this increases your total debt. First home buyers may be eligible for the First Home Guarantee which allows a 5% deposit with no LMI.
Frequently Asked Questions
How much can I borrow on a $40,000 salary?
On a $40,000 gross salary, you could borrow approximately $121,555 for a home loan. Banks assess your ability to repay at 9.25% (the current rate of 6.25% plus a 3% buffer), using up to 30% of your gross income for loan serviceability.
Can I buy a house on a $40,000 salary?
With a borrowing power of $121,555, you could buy a property worth up to $151,943 with a 20% deposit. This is not enough for a median-priced house in Sydney ($1,150,000) but may require a smaller city or unit.
What deposit do I need on a $40,000 salary?
With $121,555 borrowing power, a 20% deposit of $30,389 gets you a $151,943 property with no LMI. A 10% deposit of $13,506 would mean paying approximately $2,188 in Lenders Mortgage Insurance.
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Sourced from
1 primary source- RBA-Cash-RateRBA StatementRBA cash rate target
Cash rate target set by the RBA Board. Mortgage rates broadly track cash rate movements. Last verified rate baked into mortgage and offset calculators is the most recent published target.
General information and estimates only — not financial, tax, or legal advice. Always verify with a licensed adviser or the ATO.