How Much Can I Borrow for a Home Loan?
Your borrowing power is not one fixed number. It moves with your income, your expenses, your debts and the rate buffer lenders apply. Here is how to read it, and lift it.
7 min readAustralia-wide
Almost every buyer starts here: how much will a lender actually give me? The honest answer is that it depends on more than your salary. Lenders build a picture of your income, your commitments and your buffer against rate rises, then land on a figure. Understanding the levers means you can often borrow more, safely, and avoid nasty surprises at application time.
Your borrowing power is driven by four things: your income, your living expenses, your existing debts and credit limits, and the serviceability buffer lenders add on top of the actual rate. Increase income or deposit, cut expenses and unused credit limits, and your borrowing power rises. For a quick estimate, use the borrowing power calculator.
What determines your borrowing power
Lenders start with your assessable income: salary, and often a discounted portion of bonuses, overtime, rental or other income. From that they subtract your living expenses, your existing loan repayments, and a notional cost for your credit card and buy-now-pay-later limits, even if you never use them. What is left is what they consider available to service a new loan.
Your deposit and the loan-to-value ratio matter too, because a bigger deposit reduces the lender’s risk and can widen your options. Small changes in any of these inputs can move your maximum loan by tens of thousands of dollars.
The serviceability buffer
Lenders do not test whether you can afford today’s rate. Under regulatory guidance they add a buffer, commonly around three percentage points, and check that you could still repay at that higher assessment rate. It is a shock absorber that protects both you and the lender if rates rise.
It is also why your approved amount feels conservative. On paper you might comfortably afford the current repayment, but the lender is stress-testing you against a rate several points higher.
When rates move, the buffer moves the goalposts for everyone. The same salary can support a noticeably different loan size depending on the assessment rate in force, which is one reason borrowing power changes over time even if your income does not.
How to borrow more, safely
The most effective levers are usually on the expenses and debt side. Reduce or close unused credit card limits, since lenders count the limit, not the balance. Clear small personal loans and buy-now-pay-later accounts. Trim discretionary spending in the months before you apply, because lenders review your actual statements. And be realistic about your declared living expenses, as understating them will be caught.
On the income side, a longer, stable employment history helps, and different lenders treat bonuses, overtime and self-employed income differently, which is where a broker earns their keep by matching you to the lender that reads your income most favourably.
What you can borrow vs what you should
The maximum a lender will approve is not the same as the amount you will be comfortable repaying. Your borrowing power is a ceiling; your budget is what actually fits your life. Borrowing to the very top leaves no room for rate rises, a job change, or a new baby.
A good habit is to work out the repayment you are genuinely comfortable with first, using the repayment calculator, then borrow to that, not to the lender’s cap.
Deposit, LMI and the 20% mark
The size of your deposit shapes both how much you can borrow and how much it costs. With less than a 20 percent deposit, most lenders charge Lenders Mortgage Insurance, which protects the lender, not you, and can add thousands to your costs. A 20 percent deposit avoids it.
There are ways around a small deposit, including the First Home Guarantee and guarantor loans. Read more in our LMI guide, the First Home Guarantee explainer, and our guarantor home loans guide.
Common questions
How is home loan borrowing power calculated?
Lenders take your assessable income, subtract your living expenses, existing debt repayments and a cost for your credit limits, then test whether the remainder can service the new loan at a buffered assessment rate that is higher than the actual rate. The result is your maximum loan.
Why can I borrow less than I expected?
Usually because of the serviceability buffer and your commitments. Lenders test you against a rate several points above the real one, and count credit card and buy-now-pay-later limits as if fully drawn. Reducing those limits and clearing small debts often lifts your borrowing power.
Do credit cards affect how much I can borrow?
Yes, and more than people expect. Lenders assess the credit limit, not your balance, so a large unused card can noticeably cut your borrowing power. Lowering or closing cards before applying can help.
Does a bigger deposit increase my borrowing power?
It helps in two ways. A larger deposit lowers the loan-to-value ratio, reducing the lender’s risk and often widening your options, and reaching a 20 percent deposit avoids Lenders Mortgage Insurance, which frees up funds. It does not change the income side of the assessment, though.
Will different lenders offer me different amounts?
Yes. Lenders treat bonuses, overtime, self-employed income and expenses differently, so your borrowing power can vary meaningfully between them. Matching your profile to the most suitable lender is a large part of what a broker does.
Find out your real number
A licensed broker can calculate your borrowing power across lenders and show you how to lift it. Free to you.