How Lenders assess your affordability
Lenders test your ability to afford a mortgage by looking at your repayments over a 30 year term, based on a test mortgage rate of around 7.00%.
Lenders will include 100% of your PAYE income, or the average of the past two year's business income if you're self-employed. For investment properties, lenders will include 75% of the rental income. For owner-occupied properties, lenders have varying boarder income policies however you can typically count on up to two boarders at $150 each per week.
The other big factor when it comes to affordability is disclosure of expenses, which get assessed on a more granular level. Living expenses are assumed around $800 per adult per month and $400 per child along with allowances for insurance, rates, utilities and cars.
Lenders are looking for affordability to be evident in account conduct and bank behaviour. For a first home buyer, the amount you save plus your rent plus discretionary expenses is a good indication of how much you can afford.