How Much Can You Borrow for a Home Loan?

Your borrowing power determines the maximum loan a bank will approve. It's one of the first things you need to know when starting your property search — because there's no point falling in love with a $900,000 home if the bank will only lend you $600,000.

How Lenders Calculate Your Borrowing Power

Australian lenders follow a fairly standard process. They start with your gross income, apply a debt-to-income ratio (typically capping total debt repayments at 30-35% of gross income), subtract your existing debts and living expenses, then apply the APRA 3% buffer to determine the maximum loan you can afford.

The APRA buffer is the biggest constraint for most borrowers. Since November 2021, all banks must assess your ability to repay at 3% above the actual loan rate. If rates are 6.5%, you're tested at 9.5%. This dramatically reduces the maximum loan amount.

Quick Borrowing Power Guide by Income

These are rough estimates for a single borrower with moderate expenses ($2,500/month), no existing debts, and no credit cards, at a 6.5% interest rate:

$80,000 income: ~$420,000–$480,000
$100,000 income: ~$550,000–$630,000
$120,000 income: ~$680,000–$780,000
$150,000 income: ~$870,000–$1,000,000

Joint applicants can roughly combine their individual capacities, though lenders assess shared expenses differently.

What Reduces Your Borrowing Power?

Credit card limits — this is the most common surprise. Lenders count 3% of your total credit card limits as a monthly debt commitment, regardless of your actual balance. A $15,000 credit card you never use could reduce your borrowing power by $50,000–$80,000. Close unused cards before applying.

HECS/HELP debt — your HELP repayment reduces your net income in the lender's assessment. On an $85,000 salary, a 4% HELP repayment of $3,400/year reduces borrowing power by roughly $25,000–$35,000.

Existing loans — car loans, personal loans, and afterpay/BNPL balances all reduce your capacity. Pay these off before applying if possible.

High living expenses — lenders compare your declared expenses against the Household Expenditure Measure (HEM) benchmark and use the higher figure. Low-balling your expenses won't help if they fall below HEM.

How to Increase Your Borrowing Power

Close unused credit cards — the single quickest win. Pay off small debts (car loans, afterpay). Reduce declared expenses (cancel subscriptions you don't use before applying). Add a co-borrower — a partner's income significantly increases capacity. Consider a longer loan term — 30 years vs 25 years reduces the assessed repayment. Shop around — different lenders have different assessment criteria, especially non-bank lenders who may not apply the full APRA buffer.

Once you know your borrowing power, use the Stamp Duty Calculator to see your upfront costs, and the Mortgage Repayment Calculator to check what the repayments look like.