Can My Borrowing Capacity Change After I’ve Been Pre-Approved?

Can My Borrowing Capacity Change After I've Been Pre-Approved?

The Quick & Dirty: Yes. A home loan pre-approval is based on your financial situation, interest rates and the lender's policies at the time you're assessed. If something changes before you buy such as your income, debts, expenses or the lender's assessment criteria, the amount you can borrow may change too.

Does pre-approval guarantee how much I can borrow?

No.

Pre-approval is an indication that a lender may be prepared to lend you up to a certain amount based on the information available at the time.

It isn't final approval of your home loan.

The lender will still need to assess the property you're buying and confirm that you continue to meet its lending requirements before giving final approval.

ASIC Moneysmart explains the home loan application and approval process here

What can change my borrowing capacity after pre-approval?

A few things can make a difference.

Interest rates change:

If home loan rates increase while you're house hunting, the lender may need to reassess how much you can comfortably repay.

Australian banks are currently required by APRA to assess new borrowers using a serviceability buffer of at least 3 percentage points above the loan rate.

This means higher home loan rates can potentially reduce your borrowing capacity.

Related: Are Home Loan Interest Rates Going Up Again?

You take on new debt:

Bought a car on finance while looking for a house?

Increased your credit card limit?

Opened a new Buy Now Pay Later account?

New financial commitments can affect how much money a lender thinks you have available to repay a mortgage.

Even if the new debt feels manageable to you, it's worth speaking to your broker before taking it on while you're pre-approved.

Your income or employment changes:

Changing jobs, reducing your hours, taking unpaid leave or changing the way you're paid can potentially affect your application.

That doesn't automatically mean you can't get the loan.

It simply means the lender may need to reassess your circumstances.

Your expenses change:

A lender also considers your household expenses when assessing what you can afford.

A significant change such as new childcare costs or another ongoing financial commitment — may therefore affect your borrowing capacity.

What if nothing about my finances has changed?

Your borrowing capacity can still change.

Interest rates can move and lenders can change their lending policies and assessment criteria.

So you could have exactly the same job, salary and deposit and still receive a different borrowing figure a few months later.

Related: Why Has My Borrowing Capacity Dropped Even Though My Salary Hasn't Changed?

How long does a home loan pre-approval last?

This depends on the lender, but pre-approvals are generally only valid for 90 days.

If yours expires before you find a property, the lender may need updated information and documents before extending or reassessing it.

Ideally, your pre-approval should be reasonably current while you're actively making offers.

Should I check my pre-approval before making an offer?

If some time has passed or something about your financial situation has changed, yes, speak to your broker first.

And definitely check before bidding at an auction, where contracts are generally unconditional once you win.

A five-minute conversation before making an offer is much nicer than discovering afterwards that the numbers have changed.

In Summary:

Pre-approval is incredibly useful because it gives you an idea of your budget before you start seriously looking at properties.

But it isn't a guarantee that your borrowing capacity will stay exactly the same until you buy.

If you've been pre-approved and something has changed things like your income, job, debts, expenses or interest rates, check in before making an offer.

If you're not sure whether your current pre-approval still reflects what you can borrow, book a chat with Eshanee by clicking here.

She will check the numbers before you fall in love with the house.

Frequently Asked Questions

Can my borrowing capacity go down after pre-approval?

Yes. Changes to interest rates, income, debts, expenses or lender assessment criteria can potentially reduce the amount you're able to borrow.

Will changing jobs affect my pre-approval?

It can. How a lender treats a job change depends on things such as your employment type, industry, probation period and how you're paid. Speak to your broker before changing jobs if you're planning to buy soon.

Can I get a car loan after getting home loan pre-approval?

You can, but the new debt may affect your borrowing capacity. It's worth checking the impact on your home loan before signing up for new finance.

Does pre-approval mean my home loan is guaranteed?

No. Pre-approval is conditional. Final approval generally happens after you've chosen a property and the lender has completed its final assessment.

Any information or advice contained on the April Six Pty Ltd website is general in nature only and has been prepared without considering your individual personal objectives, financial situation or requirements. Before acting or relying on this information, you must consider the appropriateness of this information with regard to your individual circumstances and objectives.

April Six Pty Ltd is a Credit Representative of Astute Financial Management Pty Ltd | Australian Credit Licence 364253

© April Six Pty Ltd | ACN: 667183735 | Credit Representative Number 554762

Eshanee Collins is the founder of April Six, a Sydney-based mortgage broker for first home buyers and first-time property investors across Australia.