Your borrowing capacity — how much a bank will lend you — depends on your income, expenses, debts, deposit, and the lender’s assessment rate. Here’s a clear breakdown of how Australian lenders calculate what you can borrow.
Typical Borrowing Capacity by Income — April 2026
| Annual Income | No debts | $500/mo debts | With HECS $50k |
|---|---|---|---|
| $60,000 | ~$360,000 | ~$290,000 | ~$310,000 |
| $80,000 | ~$490,000 | ~$420,000 | ~$440,000 |
| $100,000 | ~$620,000 | ~$545,000 | ~$565,000 |
| $130,000 | ~$820,000 | ~$740,000 | ~$760,000 |
| $200,000 (couple) | ~$1,300,000 | ~$1,150,000 | ~$1,200,000 |
Estimates based on standard lender assessment rates (~8.5%). Actual amounts vary significantly by lender, expenses, dependants and credit history.
The 5 Key Factors That Determine Your Borrowing Power
1. Income
Lenders count base salary, overtime (usually 80%), rental income (usually 80%), investment dividends, and some government payments. Self-employed borrowers need 2 years of tax returns and lenders average the two years.
2. Expenses
Banks use the Household Expenditure Measure (HEM) as a minimum, but will use your actual declared expenses if they’re higher. This includes groceries, utilities, insurance, subscriptions, childcare, private school fees and lifestyle spending. Under-declaring expenses is a serious risk — banks check.
3. Existing Debts
Every $100/month in existing debt repayments reduces borrowing capacity by roughly $10,000–$15,000. Credit card limits are assessed at ~3.8% of the limit per month, even if you pay them off in full. A $10,000 credit card limit reduces borrowing capacity by ~$35,000–$50,000.
4. Assessment Rate
Banks don’t assess your ability to repay at today’s rate. They add a 3% buffer (APRA minimum) on top of the loan rate. At a 6% variable rate, they assess you at 9%. This is why your calculated borrowing power is lower than you might expect.
5. Deposit and LVR
The larger your deposit, the better. Below 20% deposit, you pay Lenders Mortgage Insurance (LMI) which can cost $10,000–$30,000+. Some lenders also limit borrowing for high-LVR loans.
How to Increase Your Borrowing Power
- Pay off credit cards and reduce limits — even unused limits reduce your capacity
- Pay down HECS/HELP — each $10k reduction can add ~$30k borrowing capacity
- Increase your deposit — reduces LMI and opens more lender options
- Reduce declared expenses — legitimately, by cutting subscriptions before applying
- Use a joint application — two incomes dramatically increase capacity
Calculate Your Borrowing Power
See exactly how much you can borrow based on your income and expenses.
Disclaimer: General information only. Not financial advice. Always consult a licensed professional before making financial decisions.