Key takeaways:
Borrowing power estimates how much a lender may be prepared to lend you for a home loan. It is an estimate, not a guaranteed loan amount or approval.
Your income, living expenses, debts and other financial commitments can affect your borrowing capacity. Lenders also apply their own assessment criteria.
Borrowing power can vary between lenders and change over time. Changes to your financial circumstances or lender policies can affect how much you may be able to borrow.
Aussie's Borrowing Power Calculator can give you an initial estimate based on your income and expenses. A lender's assessment may produce a different result.
Your borrowing power estimates how much you can borrow for a home loan. Understanding it early can help you set a realistic property budget before you start searching or applying for finance.
So, how much can you borrow? The answer depends on your financial circumstances and the lender.
Lenders typically consider factors such as your income, living expenses, existing debts and other financial commitments. Their lending policies and assessment criteria can also differ, which means your borrowing capacity may vary between lenders.
In this guide, we explain how borrowing power works, what lenders consider when assessing your application and what you can do to understand your borrowing position.
What is borrowing power?
Borrowing power, also known as borrowing capacity, estimates how much you can borrow for a home loan. It is not a guaranteed loan amount or approval, as the amount a lender may offer depends on its lending criteria and assessment of your financial circumstances.
Borrowing power is also different from your property purchase budget. Your borrowing power is the amount you may be able to borrow, while your purchase budget can also include your deposit and needs to account for upfront costs such as stamp duty and conveyancing.
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Why does borrowing power matter?
Knowing your borrowing power before you start looking for a property helps you set a realistic price range and understand what's within reach. It can help you:
Set a borrowing budget: Estimate how much you may be able to borrow before deciding on a property price range.
Narrow your property search: Focus on properties that better align with your overall buying budget.
Estimate repayments: See what repayments could look like at different loan amounts, interest rates and loan terms.
Keep in mind that borrowing power and your property budget are different. Your borrowing power is how much you may be able to borrow, while your property budget can also include your deposit and needs to account for upfront buying costs.
Your borrowing capacity can change if your financial circumstances or a lender's assessment criteria change. The property you choose can also affect how much you need to borrow and your loan-to-value ratio (LVR).
Use Aussie's Borrowing Power Calculator to get an initial estimate of how much you may be able to borrow.
How do lenders calculate borrowing power?
Lenders calculate your borrowing power by assessing whether you can afford the repayments on a proposed home loan. While assessment methods vary between lenders, they generally consider:
Assessable income: The income a lender accepts when assessing your application.
Existing debts and commitments: Your current debts and other ongoing financial obligations.
Household expenses: Your regular living costs.
Proposed home loan repayments: The repayments used by the lender to assess whether you can service the loan.
Your circumstances and loan structure: Other relevant factors, including the property, loan amount and how the loan is structured.
No single borrowing power formula applies to every lender. Lending policies and assessment methods vary, so your borrowing capacity may differ between lenders.
Two measures that can form part of the assessment are serviceability and your debt-to-income (DTI) ratio.
What is a home loan serviceability buffer?
Serviceability measures your ability to meet assessed home loan repayments, including if interest rates rise or your financial circumstances change.
APRA-regulated ADIs must currently apply a mortgage serviceability buffer of at least 3 percentage points above the loan interest rate, unless determined otherwise by APRA. APRA confirmed in May 2026 that the buffer would remain at this level.
For example, if a home loan has an interest rate of 5.5% p.a., a 3 percentage-point buffer would mean assessing your ability to repay at 8.5% p.a.
What is a debt-to-income ratio?
Your debt-to-income (DTI) ratio compares your total debt with your gross annual income. A DTI of 6, for example, means your total debt is six times your annual income. APRA excludes HELP debt from its DTI calculation for this measure, although lenders may still consider HELP repayments when assessing serviceability.
From 1 February 2026, APRA-regulated authorised deposit-taking institutions (ADIs) can have up to 20% of new owner-occupied loans and, separately, up to 20% of new investment loans at a DTI ratio of six times income or more.
This is a limit on each lender’s new lending, not an automatic cut-off for an individual borrower. Eligible bridging loans and loans to purchase or construct new dwellings are exempt. Lenders still apply their own lending policies and assessment criteria.
DTI and serviceability measure different things: DTI compares your debt with your income, while serviceability assesses your ability to meet home loan repayments under the lender's assessment criteria.
How much can I borrow?
There is no set amount you can borrow based on income alone. Your borrowing power depends on your financial circumstances and the lender's assessment criteria, so two borrowers with the same income may have different borrowing capacities.
For example, two couples may earn the same combined income, but one has higher existing debts or financial commitments. The couple with fewer commitments may have a different borrowing capacity once a lender assesses their overall financial position.
The result can also vary between lenders because their lending policies and assessment methods differ.
What influences your borrowing power?
Your borrowing power depends on your income, expenses, debts, household circumstances and the home loan you're applying for.
Lenders assess these factors differently, so your borrowing capacity can vary between lenders.
1. Income
Lenders consider the amount, type and consistency of your assessable income. This can include salary or wages and, depending on the lender, other eligible income sources. How lenders assess different types of income can vary.
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2. Spending and saving habits
Your transaction and savings history can give lenders a broader picture of how you manage your money. Regular spending and ongoing financial commitments may factor into this assessment.
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3. Living expenses
Lenders consider regular household expenses such as groceries, utilities, transport, insurance, education and childcare when assessing your ability to repay a home loan.
They may also use benchmarks such as the Household Expenditure Measure (HEM).
APRA guidance states that where an APRA-regulated lender uses HEM or a similar benchmark, it should generally use the higher of the borrower's declared living expenses or an appropriately scaled benchmark.
Assessment methods vary between lenders.
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4. Dependants
Lenders consider the costs of supporting dependants when assessing household expenses. More dependants can increase assessed expenses and reduce the income available to service a home loan.
5. Existing debts
Existing debts and credit commitments can reduce the income available to service a new home loan. These may include personal and car loans, existing home loans, credit cards, HELP debt and Buy Now Pay Later commitments. The impact depends on the debt type and the lender's assessment policy.
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6. Deposit size
Your deposit affects how much you need to borrow and your loan-to-value ratio (LVR), the loan amount as a percentage of the property's value.
A larger deposit generally means borrowing less for the same property and having a lower LVR. This can affect the home loan options available to you.
Lenders' mortgage insurance (LMI) may apply when you borrow more than 80% of a property's value, although lender requirements vary and eligible buyers may have access to low-deposit options.
Read our guide on how much you need for a house deposit to learn more about deposits and upfront buying costs.
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7. Credit history and credit score
Lenders may use your credit report and credit score when assessing your application. Your repayment history, previous credit applications, defaults and other information on your credit report can affect their assessment. Check your credit score with Aussie's free credit score tool before applying for a home loan.
You might also be interested in: What credit score do I need to buy a home or refinance?
8. Assets
Savings, investments, vehicles and property can help lenders understand your overall financial position. How lenders assess different assets depends on the lender and your circumstances.
9. Loan type, term and interest rate
The loan itself can also affect your borrowing power. Lenders consider factors such as the proposed loan amount, interest rate, loan term and repayment structure when assessing whether you can afford the repayments.
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Because lenders assess these factors differently, Aussie can help you understand your borrowing position and compare home loan options from participating lenders, subject to lender criteria and approval.
How can you increase your borrowing power?
There is no guaranteed way to increase your borrowing power, but changes to your finances may affect how much you can borrow. Before applying for a home loan, consider these steps:
Reduce existing debts: Paying down personal loans, credit cards, or other debts can reduce your financial commitments and may improve your borrowing capacity, depending on the lender's assessment.
Review unused credit limits: Lenders may consider your credit card and other revolving credit limits, even if you do not owe the full amount. Reducing limits you no longer need may improve your borrowing position.
Review your household spending: Review your regular and discretionary expenses to understand where your money goes. A realistic budget can help you identify expenses you are comfortable reducing and give you a clearer picture of what you can afford.
Have evidence of your income: Make sure you can document the income you want a lender to consider. What counts as eligible income and the required evidence can vary by lender and borrower circumstances.
Keep up with repayments: Pay existing loans, credit cards and other credit commitments on time. Your repayment history forms part of your credit report and may be considered when you apply for a home loan.
Build your deposit: A larger deposit can reduce how much you need to borrow for the same property and lower your LVR. Depending on lender criteria, this may also give you access to a broader range of home loan options. Use Aussie's Home Deposit Calculator to estimate how long it could take to reach your deposit goal.
Recheck your borrowing power: Your borrowing capacity can change when your income, expenses, debts or deposit change. Lending policies and conditions can also change, so consider checking your borrowing power again before you apply.
Compare lenders: Borrowing capacity can vary between lenders because their assessment policies differ. Comparing lenders can help you understand which home loan options may suit your circumstances.
The steps that may help will depend on your circumstances. Reviewing your debts, spending, deposit and borrowing power can give you a clearer picture of your position before you apply for a home loan.
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Do savings affect borrowing power?
Savings can factor into a lender's assessment, particularly if genuine savings are required. Genuine savings generally means money you have saved or held over time, rather than funds received shortly before applying. What qualifies, and whether lenders require genuine savings, varies by lender and loan.
Lenders may ask for evidence, such as savings account statements, to verify where your deposit came from and how long you have held the funds.
Your savings can also affect how much you need to borrow. A larger deposit generally means a smaller loan for the same property and a lower LVR, which may affect the home loan options available to you.
What do you need to apply for a home loan?
When you're ready to apply for a home loan, having your financial information and documents organised can make the process easier. Requirements vary by lender and can depend on your income, employment and financial circumstances. You may need to provide:
Proof of income: Recent payslips or other documents that verify your income.
Bank statements: Records showing your savings, transactions and account activity.
Debt details: Information about home, personal and car loans, credit cards and other credit commitments.
Asset details: Evidence of savings, investments, vehicles or property you own.
Identification: Documents such as a driver's licence or passport.
Dependant details: Information about anyone you financially support.
Living expenses: Details of your regular household and other ongoing expenses.
Additional documents may be required depending on your circumstances. For example, self-employed borrowers may need to provide different income evidence than salaried employees.
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Ready to understand your borrowing power?
How much you may be able to borrow depends on your financial circumstances and the lender's assessment criteria, so your borrowing capacity can vary between lenders.
Start with Aussie's Borrowing Power Calculator for an initial estimate.
When you're ready to take the next step, an Aussie Broker can review your circumstances and help you compare home loan options from participating lenders, subject to lender criteria and approval.
