How Much Can I Borrow?

Author: John Pierre Saliba — 10-year mortgage broker | Bachelor of Business & Commerce | Diploma in Mortgage Broking & Finance | Advanced Diploma in Financial Planning | MFAA Accredited

77 five-star Google reviews | 50+ lender panel | Australian Credit Licence 511092

It is the first question every home buyer asks: how much can I borrow? The answer determines your budget, your suburb shortlist, and ultimately whether you can buy the property you want.

But borrowing power is not a single number. It varies — sometimes dramatically — between lenders. A borrower who is approved for $650,000 at one bank might qualify for $780,000 at another, based on the exact same income, expenses, and financial profile. The difference comes down to how each lender interprets the responsible lending rules, assesses your income, calculates your expenses, and applies their internal risk criteria.

Understanding how borrowing power works — and knowing how to maximise it — is one of the most valuable things you can learn before entering the property market. This guide breaks down every factor that affects your borrowing capacity, explains why lender selection matters so much, and provides practical strategies to increase the amount you can borrow.

At Lend & Loan in Barangaroo, we calculate borrowing power across multiple lenders for every client, ensuring you know the full range of your options, not just what one bank will offer.

Chapter 1: How Lenders Calculate Borrowing Power

The Basic Formula

At its simplest, borrowing power is calculated by taking your assessable income, subtracting your living expenses, existing debt repayments, and any other commitments, and then determining how much loan repayment the surplus income can support — with a significant interest rate buffer added for safety.

The APRA Buffer

The Australian Prudential Regulation Authority requires all lenders to assess your ability to repay at the current interest rate plus a buffer of at least 3.0 percentage points. So if the loan rate is 6.30 percent, your ability to repay is assessed at 9.30 percent.

This buffer significantly reduces the amount you can borrow. On a $600,000 loan over 30 years, the monthly repayment at 6.30 percent is $3,718. At the assessment rate of 9.30 percent, it is $4,968 — an increase of $1,250 per month that must be covered by your surplus income.

Chapter 2: The 16 Factors That Affect Your Borrowing Power

Factor 1: Gross Income

Your gross annual income is the starting point. This includes your base salary, regular overtime, bonuses, commissions, rental income from investment properties, government payments, and any other regular income. Different lenders treat different income types differently. Some accept 100 percent of regular overtime, while others only accept 80 percent. Some accept 100 percent of consistent bonuses, while others discount them to 50 percent.

Factor 2: Employment Type and Stability

Full-time permanent employees are assessed most favourably. Part-time permanent employees are assessed on their part-time income. Casual employees generally need at least 12 months of consistent employment. Contract employees may need to demonstrate continuous contracts. Probation periods can be an issue with some lenders.

Factor 3: HECS/HELP Debt

Your HECS-HELP debt reduces your borrowing power because the compulsory repayment reduces your net income. On a $30,000 HECS debt at $100,000 income, the annual repayment is approximately $6,000 — reducing borrowing power by approximately $40,000 to $60,000.

Factor 4: Credit Cards

This is one of the biggest borrowing power killers. Lenders assess credit cards based on the full credit limit, not the current balance. A credit card with a $20,000 limit, even with a zero balance — reduces your borrowing power by approximately $60,000 to $100,000. Close every card you do not need before applying.

Factor 5: Existing Loans

Car loans, personal loans, and any other existing debts reduce your borrowing power directly. A $25,000 car loan with a $500 per month repayment reduces borrowing power by approximately $60,000 to $75,000.

Factor 6: Living Expenses

Lenders use either the Household Expenditure Measure benchmark or your actual verified expenses, whichever is higher. High spending on dining, entertainment, subscriptions, or gambling on your bank statements can increase your assessed expenses and reduce borrowing power.

Factor 7: Number of Dependents

More dependents means higher assumed living expenses and lower borrowing capacity.

Factor 8: Property Type

Small apartments under 50 square metres, rural properties, and properties in certain postcodes may attract restrictions from lenders, including lower maximum LVRs.

Factor 9: Loan Purpose (Owner-Occupier vs Investment)

Investment loans are assessed more conservatively. Rental income is typically counted at only 70 to 80 percent. Borrowing power for investment properties is typically 10 to 15 percent lower than for owner-occupier purchases.

Factor 10: Interest Rate

Higher interest rates reduce borrowing power. Each 0.25 percent increase reduces capacity by approximately 2 to 3 percent. With the RBA at 4.10 percent in March 2026, borrowing power has contracted significantly compared to 2024.

Factor 11: Loan Term

A 30-year term allows higher borrowing than a 25-year term. Most borrowers choose 30 years to maximise capacity, with the option of paying faster through extra repayments.

Factor 12: Repayment Type

Principal and interest repayments are assessed at a higher monthly figure than interest-only. Most lenders require P&I assessment regardless of the chosen repayment type.

Factor 13: Strata Levies

High strata levies on apartments can reduce borrowing power as some lenders factor these into their expense assessment.

Factor 14: Child Support and Alimony

Payments reduce income or increase expenses. Receipts may or may not be counted as income depending on the lender.

Factor 15: Second Job or Side Income

Some lenders include additional income sources with 12 months of evidence. Others exclude them entirely. This creates significant variability between lenders.

Factor 16: Location

Geographic restrictions may apply to certain postcodes — mining towns, flood zones, and very remote areas may face lower LVR limits.

Chapter 3: Why Borrowing Power Varies Between Lenders

The cumulative effect of different income assessment, expense calculation, buffer rates, and credit card treatment can create differences of $100,000 to $200,000 in borrowing power between the most conservative and most generous lenders — on the exact same borrower profile.

A broker who compares borrowing power across 50 or more lenders will find the lender whose assessment methodology best suits your specific situation. This is where a broker adds the most tangible, measurable value.

> Want your exact number? Call Lend & Loan on 02 8046 3933 or book a free borrowing power assessment. We calculate your capacity across 50+ lenders, not just one.

Chapter 4: Worked Examples

Example 1: Single Income, No Dependents

Profile: Single, $95,000 gross salary, no dependents, no existing debts, $5,000 credit card limit (zero balance), $22,000 HECS debt.

Let us walk through the full calculation. Gross income of $95,000 minus estimated tax of $22,000 equals after-tax income of $73,000, or approximately $6,083 per month. The lender deducts HEM living expenses for a single person of approximately $1,650 per month. HECS repayment at 5 percent of income is approximately $396 per month. Credit card repayment at 3 percent of the $5,000 limit is $150 per month. Surplus monthly income for loan repayments: approximately $3,887.

At an assessment rate of 9.30 percent over 30 years, $3,887 in surplus income supports a loan of approximately $520,000 at a conservative major bank. At a more generous second-tier lender that uses lower HEM benchmarks and more favourable income shading, the same borrower might qualify for approximately $590,000.

After closing the credit card (recovering $150 per month in the assessment): borrowing power increases by approximately $30,000 to $40,000. After paying off the $22,000 HECS debt (recovering $396 per month): borrowing power increases by a further $50,000 to $60,000.

Maximum achievable after full optimisation: approximately $660,000 — an improvement of $140,000 from the initial conservative assessment. That is the difference between a studio apartment and a two-bedroom unit, or between renting and owning.

The cost of optimisation: $22,000 (HECS payoff) plus $0 (closing a zero-balance credit card). The borrowing power gain: $140,000. That is a 6.4-to-1 return.

Example 2: Dual Income, Two Children

Profile: Combined $180,000 gross income ($110,000 plus $70,000), two children under 10, $18,000 car loan with repayments of $350 per month, two credit cards totalling $25,000 in combined limits, no HECS.

Combined after-tax income: approximately $12,300 per month. HEM for a couple with two dependents: approximately $3,200 per month. Car loan repayment: $350 per month. Credit card assessment at 3 percent of $25,000: $750 per month. Surplus: approximately $8,000 per month.

At a conservative bank: approximately $780,000. At a more generous lender: approximately $880,000.

After closing both credit cards (recovering $750 per month): borrowing power increases by approximately $90,000 to $110,000. After paying off the $18,000 car loan (recovering $350 per month): increases by a further $40,000 to $55,000.

Maximum achievable: approximately $1,030,000. This couple went from a maximum of $780,000 to over $1,000,000 by clearing $43,000 in debts and credit limits — a $250,000 improvement that opens up an entirely different tier of property.

Example 3: Self-Employed, Investment Purpose

Profile: Sole trader electrician, taxable income $105,000 average over two years, one existing investment property with $380,000 loan at 6.60 percent, rental income $480 per week, no other debts, looking to buy a second investment property.

The existing investment property adds complexity. Rental income of $24,960 per year is shaded to 80 percent ($19,968) and added to assessable income. But the existing loan repayment at the 9.60 percent buffer rate is approximately $3,090 per month — and this is deducted from surplus income.

At a major bank using straight average taxable income of $105,000: borrowing power for the second property is approximately $380,000. At a lender with depreciation add-backs of $12,000 (assessed income $117,000): approximately $450,000. At an alt-doc lender using BAS income of $135,000: approximately $520,000.

The right lender is the difference between buying a second investment property and being told you cannot afford one.

Chapter 4A: What Your Borrowing Power Buys in Sydney

Understanding your number is only useful when you connect it to real properties. Here is what different borrowing power levels look like in the Sydney market in April 2026.

At $400,000 to $500,000: Studios and older one-bedroom apartments in middle-ring suburbs like Canterbury, Bankstown, and Auburn. Some two-bedroom apartments in the outer west, including Mount Druitt and Blacktown. At this level, the 5% Deposit Scheme or Family Home aim to achieve is essential to avoid LMI.

At $500,000 to $650,000: Two-bedroom apartments become accessible across most of Greater Sydney — Parramatta, Olympic Park, Rhodes, Wentworth Point, Mascot, and Green Square. Some newer one-bedrooms in inner suburbs. Townhouses in the outer west. This is the sweet spot for many single-income first home buyers.

At $650,000 to $850,000: The market opens up significantly. Two to three bedroom apartments and townhouses across most suburbs. Older houses in the outer ring — Penrith, Campbelltown, Liverpool. New house and land packages in growth corridors like Marsden Park and Oran Park. This is where most dual-income couples land.

At $850,000 to $1,100,000: Houses in middle-ring suburbs become achievable — Merrylands, Guildford, parts of the Sutherland Shire, Hornsby, and Blacktown. Larger apartments in desirable inner suburbs. Three to four bedroom townhouses in growth areas.

Above $1,100,000: Freestanding houses across most of Greater Sydney, family homes in the Hills District, Inner West terraces, North Shore apartments, and Eastern Suburbs units.

Every $50,000 in borrowing power matters. The strategies in this guide — closing credit cards, paying off debts, choosing the right lender — can move you from one tier to the next.

Chapter 5: Strategies to Maximise Your Borrowing Power

Strategy 1: Close Unused Credit Cards and BNPL Accounts

This is the single quickest win available. Every $10,000 in credit card limits you close recovers approximately $30,000 to $50,000 in borrowing power. If you have multiple cards — a rewards card, a backup card, a store card — close everything except one card with the lowest possible limit.

The same applies to Buy Now Pay Later accounts. Afterpay, Zip Pay, and Klarna are all assessed as liabilities. Even small limits of $1,000 to $2,000 reduce your borrowing power and, more importantly, signal to lenders that you may have difficulty managing cash flow. Close all BNPL accounts at least three months before applying.

Timing matters: close cards at least 30 days before your loan application so the closure appears on your credit file before the lender checks it.

Strategy 2: Pay Down or Pay Off Existing Debts

Every existing debt reduces your borrowing power by approximately two to three times the annual repayment amount. A car loan with $6,000 in annual repayments reduces borrowing power by $60,000 to $90,000. A personal loan with $4,800 in annual repayments reduces it by $48,000 to $72,000.

If you have savings earmarked for a deposit AND existing debts, run the numbers both ways with your broker. In many cases, using some of your savings to clear debts and then borrowing more results in a better outcome than keeping the savings as a larger deposit but carrying the debt.

For example: a borrower with $60,000 in savings and a $15,000 car loan could use $15,000 to clear the car loan, leaving $45,000 as a deposit. The car loan payoff might increase borrowing power by $50,000, meaning the total purchasing power increases from $660,000 (with car loan) to $695,000 (without car loan but smaller deposit). Net improvement: $35,000 in total purchasing power.

Strategy 3: Reduce Discretionary Spending Before Applying

Lenders review your bank statements for the most recent three to six months. They are looking for patterns of spending that exceed the HEM benchmark. High spending on dining out, food delivery services, entertainment, subscriptions, gambling, and online shopping can push your assessed expenses above the benchmark, reducing borrowing power.

This does not mean you need to live like a monk. But in the three to six months before you plan to apply, be conscious of your spending patterns. Cancel unnecessary subscriptions. Cook at home more often. Reduce impulse purchases. The goal is to present bank statements that show responsible, consistent spending — not financial stress.

If you have regular gambling transactions on your statements, even small amounts on sports betting apps — be aware that many lenders view this negatively. Some lenders will decline applications with regular gambling transactions, regardless of the amounts.

Strategy 4: Extend the Loan Term to 30 Years

Choosing a 30-year loan term instead of 25 years reduces the assessed monthly repayment (because the loan is spread over a longer period), which increases your borrowing power. On a $700,000 loan at a 9.30 percent assessment rate, the assessed monthly repayment drops from approximately $5,895 (25 years) to approximately $5,767 (30 years) — a modest difference that translates to approximately $15,000 to $20,000 in additional borrowing capacity.

You can always make extra repayments to pay the loan off faster than 30 years. The longer term simply increases your maximum approved amount.

Strategy 5: Choose the Right Lender (The Biggest Lever)

This bears repeating because it is the single most impactful strategy. Different lenders assess the same borrower differently. The variation comes from different expense benchmarks (some use the Reserve Bank's HEM, others use internal benchmarks), different income shading (80 percent versus 100 percent for overtime, bonuses, rental income), different credit card assessment factors (2.5 percent versus 3 percent versus 3.5 percent of limit), and different treatment of supplementary income sources.

The cumulative effect of these differences can be $100,000 to $200,000 in borrowing power — from the exact same borrower profile. A borrower who walks into one bank and is told they can borrow $650,000 might qualify for $820,000 at a different institution.

This is the fundamental reason why working with a mortgage broker is essential for borrowing power maximisation. A broker compares your profile across their entire panel and identifies the lender whose methodology best suits your specific circumstances. Going directly to a single bank means accepting one lender's view of your capacity, which may be the most conservative view available.

Strategy 6: Consider a Guarantor

If a family member (typically a parent) owns property with sufficient equity, a guarantor loan provides additional security to the lender. This can increase your borrowing power, eliminate the need for a deposit entirely, and avoid Lenders Mortgage Insurance. The aim to achieve is limited to a specific amount and can be released once your own property has sufficient equity — typically within two to five years.

Guarantor loans are one of the most powerful tools for first home buyers who have strong income but limited savings. See our guarantor loans guide for full details.

Strategy 7: Include All Assessable Income Sources

Many borrowers understate their income because they do not realise certain income types can be included. Make sure your broker considers all of the following: base salary, regular overtime (with 12 months of evidence), consistent bonuses (with 12 to 24 months of history), commissions, second job or side income (with 12 months of evidence), rental income from existing properties, Family Tax Benefit, child support (regular and documented), share dividends, and trust distributions.

Each additional income source increases your borrowing power. The difference between including and excluding $10,000 in supplementary income can be $50,000 to $65,000 in additional capacity.

Chapter 6: What the 2026 Rate Hikes Mean for Borrowing Power

The Impact of Back-to-Back Hikes

The RBA raised the cash rate by 0.25 percent in February 2026 and again in March 2026, bringing the total to 4.10 percent. Major banks immediately passed these increases through to variable home loan rates, and most lenders also increased their assessment rates accordingly.

Each 0.25 percent increase in the interest rate reduces borrowing power by approximately 2.5 to 3 percent. The combined 0.50 percent increase from the two hikes has reduced borrowing power by approximately 5 to 6 percent across the board.

In dollar terms, on a borrower who could have borrowed $800,000 in January 2026, capacity has reduced to approximately $752,000 to $768,000 — a contraction of $32,000 to $48,000 in purchasing power, without any change in the borrower's income or expenses.

If Westpac's forecast of three additional hikes by August 2026 materialises (bringing the cash rate to 4.85 percent), borrowing power could contract by a further 7 to 9 percent from current levels. A borrower who qualifies for $750,000 today might only qualify for $680,000 to $695,000 by August if rates continue rising.

What This Means Practically

For borrowers who are close to the limit of what they need — where borrowing power of $700,000 means they can buy the property they want, but $650,000 means they cannot, every month of delay carries real risk. Further rate hikes reduce borrowing power, and the window to secure pre-approval at current capacity narrows with each RBA decision.

The strategic response is to get assessed now, secure pre-approval at current rates, and purchase within the pre-approval period (typically 90 days). This locks in your borrowing capacity at today's level, even if rates rise further before settlement.

The Silver Lining

As borrowing power contracts across the market, buyer competition often eases. Fewer buyers can afford the same properties, which can reduce competition at auctions and in private treaty negotiations. Well-prepared buyers who have already secured pre-approval and optimised their borrowing power are in a strong position to negotiate favourable prices in a softening competitive environment.

This is the paradox of rising rates: they reduce what you can borrow, but they also reduce what other buyers can borrow — potentially bringing property prices closer to your reach.

Chapter 7: Common Borrowing Power Myths

Myth 1: The Bank Always Gives You the Maximum

Banks do not automatically offer you their maximum. They assess against their standard criteria, which may be conservative. A second opinion from a broker often reveals significantly higher capacity with a different lender.

Myth 2: A High Salary aims to achieve a Big Loan

Income is only one part of the equation. High earners with significant existing debts, multiple credit cards, and high living expenses can have lower borrowing power than moderate earners with clean financial profiles.

Myth 3: Paying Rent Proves You Can Afford a Mortgage

Lenders do not simply compare your current rent to your proposed mortgage repayment. They assess against their own expense benchmarks with the interest rate buffer applied. Many borrowers who comfortably pay $3,000 per month in rent find that lenders will not approve a loan with a $3,000 monthly repayment — because the assessment rate pushes the assessed repayment higher.

Myth 4: All Lenders Are the Same

As this guide has demonstrated extensively, lenders vary dramatically in how they assess income, expenses, and debt. The difference between the right lender and the wrong lender can be $100,000 to $200,000 in borrowing power.

Myth 5: Online Calculators Are Accurate

Online calculators provide rough estimates using simplified assumptions. They cannot account for lender-specific policies, income type variations, or your specific financial profile. A broker's assessment is significantly more accurate.

Chapter 8: Frequently Asked Questions

Quick Reference: Borrowing Power Impact Table

Here is an at-a-glance summary of how common financial factors affect your borrowing capacity.

A $10,000 credit card limit reduces borrowing power by approximately $30,000 to $50,000. A $15,000 car loan reduces it by approximately $45,000 to $60,000. A $30,000 HECS debt at $90,000 income reduces it by approximately $35,000 to $50,000. Each dependent child reduces it by approximately $30,000 to $50,000. A $10,000 increase in gross annual income increases it by approximately $50,000 to $65,000. Choosing the suitable lender versus the worst can swing capacity by $100,000 to $200,000. Each 0.25 percent rate increase reduces it by approximately 2.5 to 3 percent.

These figures are indicative and will vary by lender and individual circumstances. The table illustrates relative impact and helps you prioritise where to focus your optimisation efforts. The clear message: lender selection and debt reduction are the two most powerful levers available.

Getting Started with Lend & Loan

Understanding your true borrowing power across multiple lenders is the foundation of a successful property purchase. At Lend & Loan, we calculate your capacity across our full panel of over 50 lenders and present you with the range of options.

Call us on 02 8046 3933 or visit lendloan.com.au/contact for your free borrowing power assessment. We will tell you exactly how much you can borrow, which lender gives you the best result, and what steps you can take to maximise your capacity.

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