How much can I borrow for a home loan?

"How much can I borrow?" is usually the first question buyers ask, and it is the one that shapes every property decision that follows. Your borrowing capacity, sometimes called borrowing power, is an estimate of how much a lender is willing to lend you based on your income, expenses, debts, deposit, and their own policy. It is an estimate, not a promise, and the figure can vary a lot from one lender to the next.

If you want a quick indicative number before reading on, you can try the free Borrowing Power calculator on the home page. It will not replace a proper assessment, but it is a useful starting point.

What lenders actually assess

Australian lenders run every application through a serviceability model. In simple terms, they add up your income, subtract your expenses and existing debts, and check whether the money left over can comfortably cover the new loan repayment. The main inputs are:

• Gross income: your PAYG salary, plus any additional income the lender is willing to include. Base salary is almost always accepted in full. Overtime, bonuses, and commissions are usually shaded, often to around 80%. Self-employed income is typically averaged over one to two years of tax returns. Rental income is usually included at 70 to 80% to allow for vacancy and costs.
• Living expenses: lenders take your declared expenses and compare them to a benchmark called the Household Expenditure Measure (HEM). They then use whichever figure is higher. Underreporting expenses does not help, because lenders also review recent bank statements.
• Existing debts and repayments: personal loans, car loans, buy now pay later balances, and other mortgages all reduce serviceability. HECS/HELP is treated as a compulsory repayment and scales with your income.
• Credit card limits: lenders count a percentage of your total credit card limit as a monthly commitment, even if the balance is zero. Common assumptions are around 3 to 4% of the limit per month.
• Number of dependents: more dependents means a higher assumed cost of living, which reduces borrowing power.
• Deposit size and LVR: your deposit determines the Loan to Value Ratio (LVR). A larger deposit lowers the LVR, opens up sharper interest rates, and can help you avoid Lenders Mortgage Insurance.
• Loan term: a longer term spreads repayments over more years, which lifts borrowing capacity. Most home loans in Australia are set at 30 years.

The APRA serviceability buffer

Lenders do not assess your repayments at the advertised rate. Under APRA's guidance, they assess your loan at roughly 3% above the actual interest rate. So if the rate you are being offered is 6.00% p.a., the lender will test whether you could still afford the repayments at around 9.00% p.a.

This buffer exists to make sure borrowers can cope if rates rise during the life of the loan. It is one of the biggest reasons borrowing capacity has moved around so much over recent years, and it is why two lenders can offer very different maximum loan amounts on the exact same financial position.

Why borrowing power differs between lenders

There is no single national formula. Each lender has its own credit policy, and small differences can add up to tens of thousands of dollars in extra (or reduced) capacity. The main reasons results vary:

• Some lenders apply a lower expense floor (HEM) than others.
• Treatment of overtime, bonus, and self-employed income differs by lender.
• Some lenders include a higher share of rental income for investors.
• HECS/HELP is treated more favourably by certain lenders in specific scenarios.
• The stress-test buffer can vary slightly between lenders for certain refinancers.

A broker's job is to know these policies and match your situation to the lender whose rules give you the best combination of borrowing power, rate, and features.

Practical ways to increase your borrowing power

If your current capacity is lower than you need, there are several levers to pull before you apply:

• Reduce or close credit card limits. Even a $10,000 unused credit card limit can cost you tens of thousands in borrowing capacity.
• Pay down or consolidate personal debts. Clearing a car loan or personal loan removes a monthly commitment from your serviceability calculation.
• Trim discretionary spending for a few months. Lenders review recent statements, so a cleaner spending pattern in the months before application can help.
• Save a larger deposit. A bigger deposit means a lower LVR, sharper pricing, and less LMI (or none at all).
• Choose the right lender. The single biggest lift often comes from picking a lender whose policies suit your income mix and situation.
• Consider a longer loan term. A 30-year term produces higher borrowing capacity than a 25-year term, though you can always make extra repayments later.

A quick note on what these numbers really mean

The figures on any borrowing calculator, including the one on this site, are general information only. They are not personal credit advice and they do not take into account your full financial situation, the specific policy of any single lender, or current promotional pricing. Use them as a starting point, then have a proper conversation with a broker before making decisions.

Frequently asked questions