Last updated: September 2026. This guide covers how Australian lenders calculate borrowing capacity. It is general information only, not financial advice.
“How much can I borrow?” is usually the first question Australians ask when they start thinking about buying a home. The answer depends on much more than your salary. Lenders look at your income, living expenses, debts, credit limits and even your HECS debt, and then test whether you could still afford the loan if rates rose by 3 percentage points.
In this guide we explain exactly how Australian lenders work out your borrowing power, walk through a real example, show you what reduces and increases your capacity, and include a simple calculator you can use to estimate your own figure.
Borrowing Power Calculator
How Much Can I Borrow? Calculator
Estimate only. Uses your rate plus a 3 percentage point serviceability buffer and counts 3.8% of credit card limits as a monthly commitment. Lenders apply their own policies.
Enter your household’s monthly take home pay, your monthly living expenses, any other loan or credit card repayments, the interest rate you expect and the loan term. The calculator adds the 3 percentage point serviceability buffer that lenders use and estimates your maximum loan.
This is an estimate only. Each lender uses its own policies, expense benchmarks and income rules.
The Short Answer
Most Australian lenders calculate borrowing power using this basic logic:
Borrowing power = the loan you could repay with your monthly surplus, tested at your interest rate plus 3 percentage points.
Your monthly surplus is your after tax income minus your living expenses and other debt commitments. Lenders then check other limits, such as your debt to income ratio, before approving a loan.
Step 1: Your Income
Lenders start with your after tax income, but they do not always count every dollar the same way:
| Type of income | How lenders usually treat it |
|---|---|
| Base salary (permanent full time or part time) | Usually counted in full |
| Overtime, bonuses and commission | Often only partly counted (for example, around 80%) and may need a two year history |
| Casual income | Usually needs six to twelve months of history |
| Self employed income | Usually based on two years of tax returns |
| Rental income | Often only 70% to 80% counted, to allow for vacancies and costs |
| Government benefits | Some are counted, others are not |
This is why two people on the same headline salary can get very different borrowing limits.
Step 2: Your Living Expenses
Lenders compare the living expenses you declare with a benchmark, often the Household Expenditure Measure (HEM), and use whichever is higher. HEM varies by household size, income and location.
Living expenses include groceries, utilities, transport, insurance, childcare, education, entertainment, subscriptions and clothing. Lenders also review your bank statements, so be honest and accurate.
Step 3: Your Debts and Credit Limits
Every existing commitment reduces how much you can borrow:
- Car loans and personal loans: the actual monthly repayment.
- Credit cards: lenders assess a percentage of the limit, not the balance, often around 3% to 3.8% per month. A $10,000 limit you never use can still count as around $380 a month.
- Buy now pay later accounts: increasingly considered by lenders.
- HECS or HELP debt: compulsory repayments reduce your take home income.
- Other home loans: repayments on existing properties.
Step 4: The Serviceability Buffer
Australia’s banking regulator, APRA, expects lenders to test whether you could afford your loan if the interest rate were at least 3 percentage points higher than the actual rate. This is called the serviceability buffer.
| Your loan rate | Assessment rate used by the lender |
|---|---|
| 5.89% | 8.89% |
| 6.14% | 9.14% |
| 6.59% | 9.59% |
The buffer is designed to protect you if rates rise, and it has a big effect on borrowing power.
Step 5: The Debt to Income Limit
Since February 2026, APRA has limited banks’ high debt to income lending. Loans where total debt is six times or more of gross income can make up no more than 20% of new lending, measured separately for owner occupiers and investors. This does not ban individual loans above 6 times income, but it can make lenders more cautious about approving them.
A Worked Example
Let’s look at a couple with a combined gross income of $150,000, which is roughly $10,000 a month after tax.
- Living expenses: $4,000 a month
- No other debts
- Loan rate: 5.89%, over 30 years
Their monthly surplus is about $6,000. The lender assesses the loan at 8.89% (5.89% plus the 3% buffer).
| Scenario | Estimated maximum loan |
|---|---|
| Assessed at 8.89%, 30 years | about $753,000 |
| Same, but with a $10,000 credit card limit | about $705,000 |
| Same, but with living expenses of $5,000 a month | about $628,000 |
| Same, but over 25 years | about $721,000 |
| If the rate rises to 6.14% (assessed at 9.14%) | about $736,000 |
| For comparison: no buffer, assessed at 5.89% | about $1,013,000 |
Illustrative figures only. Real lender calculations are more detailed and vary between lenders.
In this example, the buffer reduces borrowing power by about $260,000 compared with a calculation at the actual rate. It also shows how a single unused credit card can cut capacity by almost $50,000.
Their estimated maximum of $753,000 is about 5 times their gross income, below the 6 times level that APRA’s debt to income limit focuses on.
Borrowing Power at Different Incomes
Using the same method, with the loan assessed at 8.89% over 30 years and no other debts, here is how estimated borrowing power changes with income and expenses:
| Household | Approximate take home pay per month | Living expenses per month | Estimated maximum loan |
|---|---|---|---|
| Single, about $100,000 gross | $6,500 | $2,500 | about $502,000 |
| Single, about $125,000 gross | $8,000 | $3,000 | about $628,000 |
| Couple, about $150,000 gross | $10,000 | $4,000 | about $753,000 |
| Couple, about $200,000 gross | $13,000 | $5,000 | about $1,004,000 |
Rough illustrations only. Take home pay depends on tax, super, HECS and other deductions, and lenders use their own expense benchmarks.
What Reduces Your Borrowing Power?
- Higher living expenses or more dependants.
- Credit card limits, even if unused.
- Car loans, personal loans and buy now pay later accounts.
- HECS or HELP debt.
- Casual, bonus or commission income that is only partly counted.
- Higher interest rates, which raise the assessment rate.
- A shorter loan term.
How to Increase Your Borrowing Power
1. Reduce or close credit cards
Cancelling unused cards or lowering limits can make a noticeable difference.
2. Pay off small debts
Clearing a car loan or personal loan frees up monthly surplus.
3. Review your spending
Lower, well documented living expenses in the months before you apply can help, especially if your declared expenses are above the benchmark.
4. Choose a longer loan term
A 30 year term lowers the assessed repayment compared with 25 years, although you pay more interest over time.
5. Increase your deposit
A bigger deposit does not directly change your borrowing limit, but it increases the price you can pay and can improve the rate you are offered.
6. Apply with a partner or add income
A joint application combines incomes, although both borrowers are fully responsible for the debt.
7. Compare lenders
Different lenders treat income, expenses and debts differently. One lender might offer tens of thousands of dollars more than another. A mortgage broker can compare policies across many lenders.
How Rising Rates Affect Borrowing Power
Every increase in interest rates raises the assessment rate as well, so borrowing power falls even if nothing else changes. In our example, a rise of just 0.25 percentage points reduces the couple’s estimated maximum from about $753,000 to about $736,000, a drop of roughly $17,000.
Since the RBA raised the cash rate three times in the first half of 2026, many buyers have seen their pre-approval amounts shrink. If you already have pre-approval and rates rise before you buy, ask your lender or broker to check whether your limit has changed. It is better to find out before you bid than after.
Documents Lenders Will Ask For
To assess your borrowing power properly, lenders usually need:
- Identification, such as a driver licence and passport.
- Recent payslips, usually the last two, and sometimes an employment letter.
- Tax returns and Notices of Assessment, especially if you are self employed or earn bonuses.
- Bank statements, often for the last three months, to verify income, savings and spending.
- Details of debts and credit cards, including limits.
- Evidence of your deposit, such as savings statements or a gift letter.
Having these ready speeds up pre-approval and gives you a more accurate figure than any online calculator.
Borrowing Power for Investors
If you are buying an investment property, lenders usually count only part of the expected rent, often 70% to 80%, and assess the new loan at the higher of the actual rate plus the buffer or their own floor rate. Existing investment loans are often assessed on a principal and interest basis, even if you pay interest only, which can reduce your capacity.
Borrowing Power vs What You Can Comfortably Afford
The maximum a lender will approve is not a target. Before you borrow the full amount, ask yourself:
- Could you still manage if rates rose by 1 or 2 percentage points? With the RBA’s cash rate at 4.35% and another rise widely expected in late September 2026, this is a real consideration.
- Would the repayments leave room for savings, holidays and emergencies?
- What happens if one partner stops working for a while, for example after having a baby?
Many people find it more comfortable to borrow well below their maximum.
Borrowing Power for First Home Buyers
First home buyers may be able to buy sooner with government support, even if their borrowing power is limited. The 5% Deposit Scheme lets eligible buyers purchase with a 5% deposit without lenders mortgage insurance, while Help to Buy can reduce the size of the loan you need through a government equity contribution. Our guide to the best home loans for first home buyers explains how these schemes work.
Common Mistakes to Avoid
- Relying on online calculators alone. They give estimates; only a lender’s assessment is final.
- Underestimating living expenses. Lenders will check your bank statements.
- Forgetting credit card limits and buy now pay later accounts.
- Applying to many lenders directly. Multiple credit enquiries in a short time can affect your credit file. Getting pre-approval through a broker can help.
- Borrowing the maximum. Leave room for rate rises and life changes.
Frequently Asked Questions
How much can I borrow on a $100,000 salary?
It depends on your expenses, debts and the interest rate. As a rough guide, a single borrower on $100,000 with modest expenses and no debts might be able to borrow somewhere around four to five times their income, but lender results vary widely.
Does HECS affect how much I can borrow?
Yes. Your compulsory HECS or HELP repayments reduce your take home pay, which lowers your borrowing power.
Why do different lenders give me different amounts?
Each lender uses its own expense benchmarks, income rules and credit card assessment rates, so results can differ by tens of thousands of dollars.
What is the serviceability buffer?
It is the extra margin lenders add to your interest rate when assessing your loan, currently at least 3 percentage points under APRA guidance.
Can I borrow more with a guarantor?
A family guarantee, where a relative uses equity in their property as extra security, can help you avoid LMI or buy with a smaller deposit. It does not usually increase the amount lenders think you can afford to repay.
What is pre-approval and does it guarantee a loan?
Pre-approval, or conditional approval, is a lender’s indication of how much it may lend you after reviewing your finances. It is not a guarantee: final approval depends on the property valuation and any changes in your circumstances.
Does a bigger deposit increase my borrowing power?
Not directly, but it increases the price you can afford and may help you get a better rate or avoid lenders mortgage insurance.
The Bottom Line
How much you can borrow in Australia depends on your after tax income, living expenses, debts and credit limits, all tested at your interest rate plus a 3 percentage point buffer. In our example, a couple earning $150,000 with $4,000 of monthly expenses could borrow around $753,000, but small changes, such as a credit card limit or higher expenses, can reduce that figure significantly.
Use the calculator for an estimate, reduce debts and credit limits where you can, and compare lenders or speak with a mortgage broker to find the best result. Most importantly, borrow an amount that feels comfortable, not just the maximum you are offered.
Disclaimer: This article is general information only and does not take into account your objectives, financial situation or needs. It is not financial advice. Examples and calculator results are estimates only. Lenders apply their own credit policies. Speak with a licensed credit provider or mortgage broker for an assessment of your situation.