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Borrowing Capacity · Free Guide · Clear Path Home Loan

How Much Can You Borrow?

Your borrowing capacity depends on more than just your income. Here is exactly how lenders calculate it — and what you can do to maximise yours before applying.

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Last reviewed: April 2026
6×
Rough borrowing guide — most borrowers can borrow 5–7× gross income
3%
Buffer APRA requires lenders to add above your actual rate
38%
Maximum debt-to-income ratio most lenders will approve
01
Income — the starting point
Lenders use your net income after tax. PAYG employees need 3 months payslips. Self-employed borrowers need 2 years of tax returns, and lenders use the average income over those two years — not just the most recent year.
02
Expenses — the real limiter
Lenders use the higher of your declared living expenses or the Household Expenditure Measure (HEM) benchmark for your family size. Lenders now verify spending through actual bank statements — accurate expense declaration matters.
03
Existing debts — the hidden cost
Every dollar of existing debt reduces your borrowing capacity. Credit card limits reduce capacity even if you never use them — every $10,000 of credit card limit reduces borrowing capacity by roughly $40,000–$50,000.
04
The assessment rate buffer
APRA requires lenders to assess your loan at your actual rate plus 3%. If you are borrowing at 6%, they test you at 9%. This buffer protects you if rates rise — but it significantly reduces how much you can borrow.
05
Dependants and family size
Each dependant increases your estimated living expenses and reduces borrowing capacity. Lenders apply standardised cost estimates per child — typically $800–$1,200 per month per dependant depending on the lender.
What people get wrong

Common mistakes to avoid

✅
Cancel unused credit cards
Every $10,000 of credit card limit — whether you use it or not — reduces borrowing capacity by $40,000–$50,000. Cancel any cards you do not need at least 3 months before applying.
✅
Pay down BNPL and personal loans
Buy Now Pay Later accounts and personal loan balances are assessed as ongoing liabilities. Clearing these before applying can meaningfully increase your borrowing limit.
✅
Reduce declared expenses before applying
Lenders now review actual bank statements. Trimming discretionary spending in the 3–6 months before applying demonstrates lower living costs and improves your assessed capacity.
✅
Apply with the right lender
Different lenders use different HEM benchmarks and assessment methods. A specialist knows which lenders assess your income type most favourably — particularly for self-employed or variable income borrowers.

💡 Use our free calculator

Our borrowing calculator on the homepage gives you an instant estimate based on your income, expenses, debts and dependants — no credit check, no commitment. It is a great starting point before speaking to anyone. Enter your details and get a realistic figure in under 2 minutes.

Common questions

Frequently asked questions

On an $80,000 gross salary with average expenses and no significant debts, most lenders would assess borrowing capacity at approximately $400,000–$520,000. This varies significantly based on your expenses, debts and the lender's methodology. Use our free calculator for a personalised estimate.

A couple earning $150,000 combined with average expenses and no significant existing debts would typically qualify for $650,000–$850,000. The exact figure depends on your expense patterns, any existing debts and which lender you apply with.

Yes — but lenders want to see consistency. Generally you need 12 months of casual employment history with the same employer, and lenders will average your income over that period.

Extending to 30 years reduces your monthly repayments, which can increase your assessed borrowing capacity slightly. The trade-off is significantly more interest paid over the life of the loan. A specialist can model both.

A guarantor can help you avoid LMI and borrow with a smaller deposit, but they do not directly increase your borrowing capacity — your capacity is still based on your own income and expenses.

Explore more

Other free guides

🏠
First Home Buyer Guide
Everything before your first application
💼
Self-Employed Home Loans
How lenders assess your income
❓
Not Sure Where I Stand
Start here if you are uncertain
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