How do childcare fees impact getting a home loan in Australia?

Like many living expenses, Australian childcare fees are on the rise — but just how does this impact your borrowing capacity and ability to get a home loan?
Ava Crawford
Written by
Ava Crawford
Imogen Baxter
Reviewed by
Imogen Baxter
Last updated
February 12, 2024
0 minute read
Table of contents
Family sitting on the deck of their own home with their small children

How do childcare fees impact getting a home loan in Australia?

Like many living expenses, Australian childcare fees are on the rise — but just how does this impact your borrowing capacity and ability to get a home loan? Let’s take a look.

Why do childcare fees matter on your mortgage application?

Put simply, childcare costs are a major contributor to the financial situation of many Aussie families, which means it comes into play for many lenders looking at home loan applications.

Much of this is because your lender will need to assess your borrowing power and your ability to make your mortgage repayments, whether you’re looking for a first home buyer or a new investment property.

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Not only are childcare fees and school fees (from private providers) major expenses on their own, but the influence of these expenses can be evident across all aspects of your finances.

The biggest influence when it comes to being a home buyer is that your borrowing capacity is calculated based on not only your income but also your financial commitments - and dependents are the biggest financial commitment around.

Along with part-time or full-time childcare fees, having children assumes additional costs for homeowners, from medical bills to after-school memberships and subscriptions and larger general household expenditures reflected in your bank statements.

Quite aside from daycare or childcare costs, children also indicate lapsed income from maternity leave and higher outgoing spending on credit cards or personal loans.

However, these things may not always factor into a mortgage lender’s process of assessing your ability to make home loan repayments. The affordability of your home loan (as far as you can make your mortgage repayments) can be measured in several ways.

One way lenders look at expenses is called the Household Expenditure Measure, or HEM. The Royal Banking Commission criticised this in 2017-2019 as underestimating the cost of living and non-essential expenses (for instance, private school fees), which may have led to home loans being approved for too high loan amounts or where they should not have been approved. This has become exceedingly clear with home loan rates on the rise, where many homeowners may be unable to keep up with their rising repayments. Refinancing may not be an option in some cases due to the costs of breaking the loan or not having the home equity needed.

Thankfully, HEM is no longer usually the only benchmark used to calculate loan affordability, with most lenders asking borrowers to report on their outgoings and household expenditures in a much broader range of categories.

That said, as many child-related expenses fall into the " non-essential " category, it’s all the more important to carefully consider the mortgage repayments you can afford on a home loan, particularly if interest rate hikes should continue. You may want to consider working with a mortgage broker to find a home loan that suits you.

It’s also important to ensure you can afford the upfront costs involved in purchasing a home, whether it’s your first time or your fifth!

Not only will you need to make a deposit, but the costs on purchasing a home may include stamp duty, government fees, and if you are paying less than a 20% deposit, you may also be faced with lenders mortgage insurance (LMI).

Be sure to look into circumstances that may allow some of these upfront costs to be waived.


What is the cost of childcare in Australia?

Childcare fees in Australia range from $70-$200 per full day before the Child Care Subsidy (CCS), which varies in amount and may not apply, depending on your family’s income, the number of children in your care, and the hourly rate cap. You may also receive discounted child care if you work for a daycare service (excluding providing family or in-home daycare). These costs are generally higher in metropolitan centres, with eight of the top ten most expensive suburbs for child care located in Sydney (and two in Melbourne).

Is there any assistance available for families buying houses in Australia?

Families looking to buy a home in Australia may be able to access government assistance if it is the home buyer's first home via all of the government schemes available to first-home buyers. Likewise, there may be assistance for rural home buyers and single-parent families. Single parents may be able to pay a deposit as low as 2% without needing to pay lenders mortgage insurance, but there are a range of criteria to meet to qualify for this scheme.

How far back into my finances will my lender look?

Generally speaking, a lender should not need to delve more than six months into your finances to get a comprehensive understanding of your financial situation. The exceptions to this will be any major marks in your credit report that need following up or making future projections (for instance, if you are pregnant and going on maternity leave or paternity leave and will be adding to your childcare fees).

How much does a child impact my borrowing capacity?

While dependent children definitely impact your borrowing capacity, no set amount detracts from your maximum capacity, as individual lenders will each use their own formula to work this out. A rough estimate would put one child as decreasing your borrowing capacity by $300 monthly. A mortgage broker may better understand each lender’s approach to this and how subsequent children impact it.

Does paying child support impact my borrowing capacity?

Child support contributes to your borrowing capacity, whether you are paying it or receiving it. If you are contributing child support, you will need to provide an accurate amount as a regular expense, but this does not mean you necessarily have dependent children when that question is asked on your application. Child maintenance support will need to be counted as a supplementary income if you are receiving it.

This article is intended to be general in nature and is not personal financial product advice. It does not take into account your objectives, financial situation, or needs. In particular, you should seek independent financial advice and read the relevant product disclosure statement (PDS), or other offer documents before making an investment decision in relation to a financial product (including a decision about whether to acquire or continue to hold).
Prepared by OwnHome Services Pty Ltd ACN 664 492 059. This information does not take your personal objectives, circumstances or needs into account. Always read the disclosure documents for products and services before deciding on a product or service, and consider seeking independent legal, financial, taxation or other advice for your unique circumstances.

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