How much can you actually
borrow for a home loan?

What lenders actually look at

Lenders don't just look at your income. They run a detailed assessment of your entire financial picture, and the numbers they come up with can vary significantly from one lender to the next.

Here's what goes into a borrowing capacity assessment.

Income

Lenders count gross income (before tax) from employment, self-employment, rental properties, government payments, and investment returns, but not all income types are treated equally. PAYG employment income is easiest to assess. Self-employment income typically requires 2 years of tax returns and is sometimes assessed more conservatively.

Existing debts

Every existing debt reduces your capacity. Credit cards are assessed at their full limit, not your current balance. A $10,000 credit card limit typically reduces your borrowing capacity by $40,000–$50,000. Car loans, personal loans, and HECS debt all count. We often recommend reducing or cancelling unused credit cards before applying.

Living expenses

Lenders estimate your living expenses either from what you declare or from benchmarks. APRA's Household Expenditure Measure (HEM) is often used as a floor, meaning if you say your expenses are lower than HEM, most lenders will use HEM anyway. Higher declared expenses reduce your assessed capacity.

The serviceability buffer

APRA requires lenders to assess your ability to repay at a rate at least 3% higher than the loan's interest rate. So if you're applying for a 6.14% rate, lenders check whether you can afford repayments at 9.14%. This buffer was designed to protect borrowers from rate increases, but it also significantly reduces the maximum loan amount.

How to increase your borrowing capacity

If the initial assessment isn't where you need it to be, here are the most effective levers:

• Cancel or reduce credit card limits (even unused cards count)
• Pay down or consolidate personal loans and car loans
• Pay down HECS debt if you're close to the threshold
• Reduce your declared living expenses (legitimately)
• Apply with a different lender, capacity can vary by $100K+
• Add a co-borrower (partner, family member)
• Increase your income (obviously, but sometimes timing a raise before applying matters)

Why different lenders give different amounts

This is one of the most misunderstood things about borrowing. Two lenders using the exact same income can approve very different amounts, because they use different assessment models, different HEM tables, different treatment of rental income, and different shading factors for variable income.

This is one of the most valuable things a good broker does: we know which lenders assess your income type most favourably. We don't just take the first lender's number and accept it.