“They said I could afford to borrow… so why am I drowning?”

That’s what Brenda* said when she came to me twelve months after buying her first home.

Brenda’s story is becoming more and more common. At 32, single, and ready to stop renting. She had worked long hours determined to build up a good deposit. With that achieved her advisor secured her that pre-approval letter that made her eyes light up with the excitement that she was finally there.

“They said I could borrow up to $680,000,” she told me. So, when she found a place at $665,000, she jumped on it before anyone else could, five weeks later she was handed the keys and her dream of home ownership was achieved.

The first few months were fine. She bought a lounge suite, celebrated with friends, and even got some outdoor furniture for the new deck. But six months later, things got noticeably tight. Then painful. Managing bills were becoming a bit of a juggling act. A car repair and no savings meant the credit card got used. Now the credit card was carrying an unpaid balance. Life had never been like this before, the card had always been paid in full every month.

Juggling bills, skipping social events, and lying awake at night doing mental gymnastics to keep everything afloat was not what Brenda had imagined home ownership to look like. She knew there would be some changes in her spending and she had proactively reduced spending from day one, so why now all this stress and anxiety?

Her question to me was quite simple, but heartbreaking. Heartbreaking because I get asked this question more often than I would like:

“How could they say I could afford this… if I clearly can’t?”

The Hard Truth About “You Can Afford to Borrow”

When a lender says, “You can afford to borrow,” what they actually mean is:
“Based on our criteria we’re willing to lend you this amount.”

There’s a massive difference.

Lenders base approvals on their formulas, stress-tested interest rates, and assumptions about your expenses from reviewing previous bank statements. Income and job stability also are factors but they don’t know what else is important to you in the future.

How much you value travel, what other financial needs you may have going forward. How much you have budgeted for to build and maintain an emergency fund etc.

Brenda didn’t buy irresponsibly. She didn’t overspend on brunch. She simply misunderstood what “affordable” really meant for her.

5 Steps Brenda Could Have Taken to Know if That Loan Was Truly Affordable

If you’re thinking of buying a home – or refinancing – here are five steps to make sure your version of “affordable” lines up with reality, not just the bank’s criteria:

1. Build a “Post-Mortgage” Budget

Instead of starting with how much you can borrow, start with what your life looks like after repayments.

• Factor in rates, insurance, maintenance, and buffer room.
• Then ask: Can I live the life I am happy with – not just survive?

2. Stress-Test with Your Actual Lifestyle

Banks do a “stress test” with interest rate increases – but they don’t stress-test for your real habits.

• Use your current spending history (not a trimmed-down fantasy version), I recommend basing this on at least 3 months history.
• Add .5% of the property value per annum to your budget for ‘Home stuff’. Once you own it there will be things you want to do to make it your own so you need to have a plan that makes this possible.
  Example: A home worth $1million at .5% = $5,000 per annum or $96.15 per week.

3. Set Personal Limits – Not Bank Limits

Don’t borrow the maximum just because it’s offered.

• Decide what you want your mortgage repayments to be – and cap your search accordingly.
• A good rule of thumb although sometimes not always easy to achieve is to keep the total of all your debt repayments under 42% of your net income
  
  Here's a free calculator to help understand what life looks like once you factor in your mortgage payment and other debt commitments.

4. Plan for the “What Ifs”

Life won’t always be linear.

• What if your income drops?
• What if interest rates rise?
• What if your car dies the same month your hot water cylinder gives out?

Budget for the unexpected and ensure you have a regular savings component to your budget building you an Emergency Fund.

Use this calculator to work out your minimum savings capacity.

5. Talk to an Independent Financial Coach

Before signing the dotted line, talk to someone whose only job is to make sure your financial life is sustainable.

• A coach doesn’t benefit from your mortgage approval. A financial advisor normally earns their income when you take out the loan and the last thing you want to do is take out a mortgage you will struggle to truly afford.
• A coach will help you assess real-life affordability and build long-term resilience.

Final Thoughts: Ownership Without Overwhelm

Brenda isn’t alone and if you’re reading this thinking, “I so get this, that’s me too,” then don’t panic it’s not too late. The sooner you get clarity on what you can afford – not just what the bank says – the easier your financial life becomes.

Because a home should give you security. Not stress.

Need help working through your real affordability? I can help you – before or after the loan. Let’s talk through your options,  book a Free Discovery Call with me today.

*Name changed to protect client privacy.