How Much Can I Borrow? Home Loan Borrowing Power in Australia (2026)

What borrowing power actually means

Your borrowing power is the maximum a lender is willing to lend you for a home loan. It is built from your income, minus your living expenses, minus your existing debts, with a safety margin on top. It is a lender’s view of risk, not a measure of what you can comfortably live with.

That distinction matters. A lender can approve you for an amount that would leave your budget stretched if rates rose or your circumstances changed. Borrowing power tells you the ceiling. What you should actually borrow is a separate, more personal decision about the repayments you want to live with.

How lenders calculate it

Behind the calculator, every lender runs roughly the same sequence. The inputs are where they differ.

• Gross income. Your base salary, plus a portion of overtime, bonuses, commissions and (for investors) expected rent. Lenders often discount variable income, counting only 80% of overtime or rent, because it is less reliable than base pay.
• Living expenses. Your declared monthly spending, floored at a benchmark (see HEM below). If your real spending is higher than the benchmark, the higher figure is used.
• Existing debts. Repayments on personal loans, car loans, HECS/HELP and buy-now-pay-later, plus a notional repayment on your credit card limits.
• Dependants. Each dependent child increases your assessed living expenses, which lowers the surplus available to service a loan.
• Deposit and loan size. A larger deposit means a smaller loan to service, and may keep you below thresholds where Lenders Mortgage Insurance applies.

What is left after expenses and debts is your surplus. The lender then tests whether that surplus covers the repayments on the loan you want, assessed at a buffered rate.

The HEM benchmark

Lenders do not simply take your word on what you spend. They compare your declared living expenses against the Household Expenditure Measure (HEM), a benchmark of typical spending for a household of your size, income and location. If you declare less than the benchmark, the lender uses the benchmark anyway. If you declare more, they use your figure. The practical effect is a floor under your assessed expenses, which is why understating your spending rarely lifts your borrowing power.

The serviceability buffer

This is the single biggest reason your approved amount feels lower than the repayments suggest it should be. Lenders do not test you at the actual interest rate on the loan. Under APRA guidance they add a buffer, around 3 percentage points, and check that you could still afford the repayments at that higher assessment rate.

So if a loan is advertised at, say, 6%, you are assessed as though you were paying around 9%. The buffer exists so that borrowers are not pushed to the edge the moment rates rise. It also means a rate cut does not lift your borrowing power as much as you might expect, because the buffer moves with the rate.

Debt-to-income (DTI) limits

Alongside serviceability, most lenders apply a debt-to-income ratio. DTI compares your total borrowings (the new loan plus any existing debt) against your gross annual income. A DTI of six, for example, means your total debt is six times your income.

Lenders watch high-DTI lending closely, and many tighten their criteria or charge more once a loan pushes past a certain multiple. A strong income with little other debt gives you more room; a modest income already carrying a car loan and credit cards hits the ceiling sooner. DTI is one reason clearing existing debt can lift your borrowing power even when your income has not changed.

Why two banks give different numbers

It surprises buyers that the same payslips produce different answers at different lenders. There is no single formula. The variation comes from:

• Different expense benchmarks. Lenders use their own HEM tables and update them at different times.
• Different treatment of variable income. One lender may count 80% of your overtime, another 100%, another none.
• Different buffers and floor rates. Most apply the APRA minimum buffer, but some test at a higher rate as their own policy.
• Different DTI limits. One lender may stop at a lower multiple than another for the same profile.
• Different rules on HECS/HELP, dependants and casual work. A lender close to clearing your HELP debt may look past it; another may not.

This is exactly why shopping around, or using a broker who knows which lender suits your profile, can be worth tens of thousands of dollars in capacity. See our guide to choosing a mortgage broker for how that works.

Indicative borrowing by household income

The table below gives a rough sense of how borrowing capacity scales with income. These are indicative only. Your real figure depends on your living expenses, dependants, existing debts, deposit, the interest rate and the serviceability buffer, and it will differ between lenders.

Prefer a glance? The table below shows roughly how capacity scales with income, assuming minimal other debt and a standard deposit.

What lifts and what cuts your capacity

If your borrowing power comes back lower than you hoped, several of these levers are within your control before you apply.

What lifts it:

• Clearing or reducing credit card limits. Lenders count the full limit, not the balance, so cancelling unused cards and trimming limits is one of the fastest wins.
• Paying off personal and car loans. Every repayment you remove frees up surplus to service a mortgage.
• A bigger deposit. A smaller loan is easier to service and may keep you under LMI thresholds.
• A longer loan term. A 30-year term spreads the assessed repayment thinner than a 25-year one, which lifts capacity, though you pay more interest over time.
• Reducing discretionary spending. Lenders review recent statements, so cutting back in the months before you apply can lower your assessed expenses.
• Clearing a small HECS/HELP balance. If the debt is nearly paid off, settling it removes the compulsory repayment from the assessment.

What cuts it:

• High credit card limits, even on cards you never use.
• Buy-now-pay-later and car loans, which lenders treat as ongoing commitments.
• Dependants, which raise your assessed living expenses.
• A large HECS/HELP balance, through the compulsory repayment taken from your pay.
• Variable or casual income, which lenders discount or may not count at all.
• A higher interest rate or buffer, which raises the assessed repayment on the same loan.

What to do next

Knowing your borrowing power is the foundation of a confident search. Once you have a figure you trust, here is where to take it:

1. Get a personal estimate. Run your numbers through the borrowing power calculator before you talk to anyone, so you walk in with a baseline.
2. Work out your deposit. Your deposit sets the loan size you need to service. Our deposit guide covers the 20% rule and the low-deposit schemes.
3. Understand LMI. A smaller deposit can mean Lenders Mortgage Insurance. See what it costs in our LMI guide.
4. Get pre-approval. A calculator estimate is not a commitment. Our pre-approval guide explains how conditional approval turns a number into a real offer.
5. Check first home buyer support. Grants and schemes can change the deposit and price you are working with. Start with the national first home buyer guide.