"How much can I borrow?" is usually the first number people want, and online calculators give wildly different answers. That's because every lender uses its own formula. But the ingredients are similar, and once you understand them, you can improve your result.
The basic formula
Lenders work out how much income you have left each month after:
- Tax
- Living expenses
- Existing debt repayments
- A buffer for rising rates
Whatever's left is what you could put towards a new home loan repayment. They then calculate how big a loan that repayment could support.
1. Income
Lenders count:
- Base salary: usually 100%
- Overtime and allowances: often 80%, sometimes needing a 6 to 12 month history
- Bonuses and commission: often averaged over two years
- Rental income: usually 70% to 80% of the rent
- Self-employed income: usually averaged from the last two years' tax returns
- Government benefits: some are accepted, like family tax benefits, depending on the lender
2. Living expenses
You'll declare your expenses, and lenders compare them with the Household Expenditure Measure (HEM), a benchmark based on household size and income. They use whichever is higher.
So cutting your declared expenses below HEM won't increase your borrowing power. Reducing actual spending still helps, because lenders check bank statements.
3. Existing debts
- Car and personal loans: actual repayments
- Credit cards: usually 3% to 3.8% of the limit per month, even if you owe nothing
- Buy Now Pay Later: some lenders treat it as a debt
- HECS/HELP: repayments reduce your net income, though lender treatment has been changing
A $15,000 credit card limit can reduce your borrowing power by tens of thousands of dollars.
4. The serviceability buffer
APRA requires lenders to test whether you could afford repayments at a rate at least 3% above the actual rate. At an actual rate of 6.49%, you're tested at around 9.49%. This is the single biggest reason borrowing power has fallen as rates have risen.
5. Dependants
Each dependant increases assessed living costs, reducing borrowing power.
A rough example
A single buyer earning $120,000, no dependants, no debts, a $5,000 credit card limit and living expenses of $2,400 a month might be able to borrow somewhere around $600,000 to $650,000 with many lenders at current rates.
A couple earning $160,000 combined, with one child and a $20,000 car loan, might land in a similar range despite the higher income.
Use the borrowing power calculator on our site for a quick estimate, then talk to us for lender-specific figures.
How to increase your borrowing power
- Close or reduce credit card limits.
- Pay off small debts, especially car loans and personal loans.
- Close BNPL accounts you don't use.
- Show consistent income, including overtime history.
- Apply with the right lender. Some lenders' calculators are more generous for your situation.
- Choose a longer loan term. A 30-year term usually allows a bigger loan than 25 years.
The DTI limit
Since February 2026, APRA has limited banks' new lending at six times income or more to 20% of new loans. Most first home buyers and owner-occupiers aren't affected, but some high borrowers may find fewer lenders able to help. See debt-to-income ratio explained.
Frequently asked questions
Why do different calculators give different answers?
Each lender uses different assumptions for expenses, buffers and income shading.
Does my deposit affect how much I can borrow?
Not directly. Your deposit affects how much you can spend in total, and your LVR, but borrowing power is about income and expenses.
Should I borrow the maximum?
Not necessarily. Borrow what you can comfortably repay, with room for further rate rises.
Want an accurate number from real lenders? Call Finfident on 02 6416 2142, or Call, Text or WhatsApp 0424 545 654 and we'll compare borrowing power across our panel.
Want to know if this applies to you?
Talk it through with a Finfident broker. It's free and there's no obligation.
