- Lenders test your repayments at a rate about 3% above the actual rate.
- Credit card limits reduce borrowing power even when the balance is zero.
- A lender whose policy suits your income can change the result significantly.
What lenders look at
Each lender runs your details through its own serviceability calculator. These are the main inputs.
- Income: salary is usually counted in full. Bonuses, overtime, commission and rental income are often shaded, commonly to 80%. Self-employed income is usually averaged over the last one or two years.
- Living expenses: lenders use the higher of your declared expenses and a benchmark based on your household size and income.
- Existing debts: repayments on car loans, personal loans, HELP debt and other mortgages are deducted.
- Credit cards: lenders count a monthly repayment of around 3% to 3.8% of each card limit, whatever the balance.
- Dependants: each dependant increases the expenses the lender assumes.
The assessment buffer
Australian lenders are expected to test whether you could afford repayments at least 3 percentage points above the loan’s actual rate. If the rate is 6.8%, your repayments are assessed at around 9.8%. This buffer is the main reason borrowing power is often lower than people expect.
Borrowing power is not the same as what you can buy
The price you can pay depends on your borrowing power plus your deposit, less stamp duty, legal costs and lenders mortgage insurance if your deposit is under 20%. A larger deposit lowers your LVR, which can reduce costs and widen your choice of lenders.
Ways to increase your borrowing power
- Reduce or cancel credit card limits you do not use.
- Pay off small debts such as car loans or buy now, pay later accounts.
- Make sure all your income is documented, including allowances, overtime and rental income.
- Consider a longer loan term, which lowers the assessed repayment.
- Apply with a lender whose policy suits your income. Some lenders count more of your bonus, overtime or rental income, or use a lower expense benchmark.
Why a broker helps
For the same borrower, borrowing power can vary by tens or even hundreds of thousands of dollars between lenders. A broker can compare how different lenders assess your situation before you apply, which avoids unnecessary credit enquiries.
Source: Australian Prudential Regulation Authority (APRA). Last reviewed October 2026.
This article is general information only and does not take into account your objectives, financial situation or needs. It is not credit, tax or financial advice. Lender criteria and government schemes change, so check current details and seek advice before acting.