What is borrowing capacity?
Borrowing capacity is an estimate of how much a lender may be prepared to lend based on its assessment of your financial position and the proposed loan. It is sometimes called borrowing power.
A lender generally wants to establish that you have sufficient capacity to meet the proposed repayments while also accounting for your existing financial commitments and living expenses.
Borrowing capacity is not the same thing as your property budget. Your final purchasing position can also depend on factors such as:
- your available deposit
- purchase costs
- stamp duty where applicable
- grants or government schemes where applicable
- property valuation
- loan-to-value ratio
- lender eligibility requirements
- the type of property being purchased
What affects how much I can borrow?
Several factors can materially affect a home loan assessment.
1. Your income
Income is one of the major components of borrowing capacity. Depending on your circumstances, lenders may consider income such as PAYG salary or wages, overtime, bonuses, commissions, allowances, rental income, self-employed income and other acceptable income sources.
However, lenders may not treat every type of income in exactly the same way. Some income may be assessed differently depending on its consistency, history and the lender's policy.
2. Your living expenses
Lenders consider your living expenses when assessing whether you can afford a proposed home loan. This can include expenditure across groceries, utilities, transport, insurance, education, childcare, recreation, subscriptions, private health costs and other regular household expenditure.
Applicants should provide realistic information about their actual expenses. The objective should not be to artificially minimise expenses to create a larger borrowing figure.
3. Existing loans and debts
Existing financial commitments can reduce borrowing capacity. These may include home loans, investment loans, personal loans, car finance, novated lease commitments where relevant, HELP or student loan obligations where applicable, buy now pay later facilities where relevant, and other ongoing credit commitments.
The impact depends on the lender's assessment methodology and the individual circumstances.
4. Credit card limits
Credit cards can affect borrowing capacity even when the card isn't carrying a large balance. Lenders may assess the available credit limit and the repayment commitment associated with that facility.
This means a credit card with a substantial unused limit can still affect a home loan assessment. Existing facilities are worth considering as part of an overall lending review rather than treated as a single fix.
5. Dependants
The number and circumstances of financial dependants can affect household expenses and therefore borrowing capacity. Two households earning the same income can consequently have different borrowing positions.
6. Interest rates and lender assessment rates
A lender does not necessarily assess your home loan only at the interest rate you will initially pay. For APRA-regulated lenders, residential mortgage serviceability assessments are subject to prudential requirements.
As at August 2026, APRA's mortgage serviceability buffer remains 3 percentage points. This means regulated lenders generally need to assess a borrower's ability to service the mortgage at an interest rate at least 3 percentage points above the loan rate, subject to the applicable prudential standard and the lender's own assessment methodology.
This is a current regulatory setting reviewed by APRA over time rather than a permanent rule, and it does not mean every lender in Australia uses an identical calculator or assessment method.
7. Loan term
The proposed loan term can affect required repayments and serviceability. A longer loan term may reduce the required repayment compared with a shorter term, but it can also result in interest being paid for longer.
Borrowing capacity should therefore not be maximised simply by extending a loan term without considering the longer-term implications.
8. Property and loan purpose
The proposed lending structure can also matter. The assessment may differ depending on owner-occupied versus investment lending, principal-and-interest versus interest-only repayments, purchase versus refinance, property type, loan-to-value ratio, construction lending and other features of the application.
Different lenders can have different credit policies and risk appetites.
Why can two banks give me different borrowing capacities?
Because lenders do not necessarily assess every part of an application identically. Differences can arise from:
- how income is assessed
- treatment of overtime, bonuses or commissions
- treatment of self-employed income
- rental income assessment
- living-expense methodology
- existing debt assessment
- credit card commitments
- loan terms
- lender-specific credit policy
- product and property requirements
The biggest number isn't automatically the right one
One lender's borrowing-capacity result should not automatically be treated as the answer for the entire market. It also doesn't mean that the lender offering the largest loan is necessarily the most appropriate lender.
The structure, costs, features and suitability of the lending still matter.
What is the APRA serviceability buffer?
The Australian Prudential Regulation Authority, or APRA, regulates banks and certain other authorised deposit-taking institutions. APRA requires regulated lenders to apply a mortgage serviceability buffer when assessing residential mortgage applications.
As at August 2026, APRA has confirmed that the mortgage serviceability buffer remains at 3 percentage points. For example, a regulated lender assessing a home loan with an actual interest rate of 6% would generally need to assess serviceability using a rate of at least 9%, subject to the applicable prudential requirements and the lender's own assessment methodology.
This does not mean the borrower pays 9%. It is an assessment mechanism intended to test the borrower's capacity to manage repayments if circumstances or interest rates change. Because macroprudential settings are reviewed periodically, check the current APRA position rather than assuming this figure is permanent.
What about debt-to-income ratios?
Debt-to-income ratio, often called DTI, compares a borrower's total debt with their gross income. A higher DTI can indicate that a borrower is taking on a large amount of debt relative to income.
From February 2026, APRA requires authorised deposit-taking institutions to limit the proportion of new residential mortgage lending with a debt-to-income ratio greater than or equal to six. The limit applies to owner-occupier and investor lending separately and includes specified exemptions.
This is a portfolio-level lending limit that applies to regulated institutions. It is not a law preventing an individual from borrowing more than six times their income, it is not a borrowing-capacity calculator, and a DTI below six does not guarantee approval. Individual applications are still assessed against each lender's credit criteria.
Does my deposit determine how much I can borrow?
Your deposit and borrowing capacity are related but different. Borrowing capacity concerns the lender's assessment of your ability to service the debt. Your deposit helps determine how much of the property's purchase price you need to borrow.
For example, someone may have enough income to service a particular loan but not yet have the deposit and purchase costs required for the property. Another borrower may have a substantial deposit but still be limited by serviceability. Both sides of the equation matter.
How much should I borrow?
The maximum amount a lender may approve and the amount you feel comfortable borrowing are not necessarily the same. Before deciding on a budget, consider how the repayments fit with:
- your normal living costs
- savings goals
- family plans
- expected changes to income
- other debts
- future property plans
- potential interest-rate changes
- maintaining an appropriate financial buffer
Be realistic about repayments
ASIC's Moneysmart recommends being realistic about what you can afford and considering how repayments could change if interest rates rise.
Can an online borrowing calculator tell me exactly how much I can borrow?
No. Online borrowing calculators can provide useful estimates, but they cannot guarantee how a lender will assess or approve an application.
Different calculators may make different assumptions, and a lender's actual assessment can consider information that a simple calculator does not fully capture. A calculator result is an estimate, not a lender decision.
Does a higher income always mean I can borrow more?
Not necessarily. Higher income can improve borrowing capacity, but the lender considers the broader financial position. For example, a high-income applicant may also have:
- significant existing debts
- high credit card limits
- several dependants
- substantial regular expenses
- investment commitments
- other financial obligations
Income alone doesn't decide the outcome
A lower-income household with fewer commitments may therefore have a different result than a simple income comparison suggests.
Can reducing debt increase my borrowing capacity?
Potentially. Existing debt repayments and credit commitments can affect serviceability, so reducing debt may change an applicant's borrowing position.
However, financial decisions shouldn't be made purely to maximise a borrowing-capacity calculator. The effect will depend on the debt involved, the lender and the applicant's overall circumstances.
What if I'm self-employed?
Self-employed applicants can still obtain home loans, but income assessment can be more complex. Depending on the lender and product, assessment may involve business and personal financial information and evidence of income.
Different lenders can also assess self-employed income differently, so the same financials can produce different outcomes across lenders.
What if I'm buying an investment property?
Investment borrowing capacity can involve additional considerations, including:
- existing home loan debt
- proposed investment debt
- rental income
- existing investment income
- property expenses
- loan structure
- interest-only or principal-and-interest repayments
- overall debt-to-income position
Capacity is only part of the decision
The maximum available borrowing amount is only one part of an investment lending decision. Structure, cash flow and your longer-term plans also matter.
Should I find out my borrowing capacity before looking for a property?
It can be useful to understand your likely borrowing position before becoming committed to a particular property. A lending review can help establish:
- an indicative borrowing range
- likely deposit requirements
- potential loan structures
- information or documents that may be required
- issues that could affect the application
- whether the proposed purchase range appears realistic
Indicative isn't unconditional
An indicative assessment or pre-approval is not the same as unconditional loan approval. The property, valuation and final lender assessment can still matter.
Frequently asked questions
How many times my salary can I borrow for a mortgage in Australia?
There is no universal salary multiple that determines how much every Australian borrower can obtain. Lenders assess income alongside expenses, debts, dependants, interest rates, loan term and other factors. APRA's debt-to-income lending limits apply to lender portfolios and should not be interpreted as a rule that every borrower can automatically borrow a particular multiple of income.
Does my partner's income increase our borrowing capacity?
Potentially. Where two applicants apply together, acceptable income from both applicants may form part of the lender's assessment. Their debts, expenses and other commitments will also be considered.
Do credit cards reduce borrowing capacity?
They can. A lender may assess the repayment commitment associated with a credit card's available limit rather than focusing only on the amount currently owing.
Does HECS or HELP debt affect borrowing capacity?
It can affect the assessment because compulsory student loan repayments can reduce available income. The actual impact depends on the applicant's circumstances and the lender's methodology.
Does having children reduce borrowing capacity?
Dependants can affect household expenses and therefore may affect the amount a lender determines can be serviced.
Can different banks lend me different amounts?
Yes. Lenders can apply different policies and assessment methodologies, so borrowing-capacity results can vary between lenders.
Is borrowing capacity the same as pre-approval?
No. Borrowing capacity is an estimate of potential lending capacity. Pre-approval involves a lender assessing an application under its applicable process and conditions. Neither should be treated as unconditional approval for a particular property.
Is the maximum amount I can borrow the amount I should borrow?
Not necessarily. The amount a lender is willing to approve and the amount you are comfortable repaying can be different. Your lifestyle, financial buffer and future plans should also be considered.
General information only. This information does not take into account your objectives, financial situation or needs. Borrowing capacity varies between lenders and applicants and is subject to lender credit assessment, eligibility requirements and applicable lending criteria. Indicative borrowing figures and pre-approvals are not unconditional loan approvals.