Will a personal loan reduce my home-loan borrowing capacity?
Yes. A personal-loan repayment is an existing commitment and can reduce mortgage serviceability. The size of the effect depends on the repayment, remaining term and the home lender’s assessment model.
The monthly payment matters more than a simple debt subtraction
A $15,000 personal-loan balance does not just reduce the mortgage limit by $15,000. The repayment consumes monthly serviceability. Under an illustrative 9% assessment rate and 30-year term, $400 a month represents about $49,700 of mortgage capacity before other factors.
But paying the personal loan out also uses your deposit
If paying it out costs $15,000, your savings fall by that amount. A larger theoretical mortgage limit is only useful if you can still cover the deposit, duty, fees and reserve. Compare the loan-required figure after the payout with the lender assessment, not just the apparent capacity increase.
What if it is nearly paid off?
Ask whether the lender can recognise its short remaining term or require a confirmed payout before settlement. Do not assume an imminent final payment is automatically ignored. Prepare the repayment schedule and current payout statement.
Run both sides of the decision
Use borrowing power with and without the monthly commitment, then reduce savings by the actual payout in deposit and buying costs. The same two-test approach applies to paying off HELP before buying.
Use the enquiry form for an initial broker review. No lender application is made just by enquiring.
Review my home loan optionsSources and verification
General information only. It is not personal financial, tax or legal advice. Finance approval, pricing and structure are subject to lender assessment and your circumstances.