Borrowing Power Explained Australia | What Lenders Look At

By AusTaxTools Editorial Team ·

Short answer

Borrowing power is how much a lender will let you borrow based on their assessment of your income, expenses, debts, and a stress-test buffer. It is not how much you should borrow — it is the ceiling. Your comfortable repayment level should set the actual target.

Income assessment

Lenders use base salary, regular overtime, bonuses (often discounted), and rental income. Casual and contract income may be assessed at a lower rate. How your income is categorised matters as much as the amount.

Expense benchmarks

Banks use the Household Expenditure Measure (HEM) or your declared expenses — whichever is higher. HEM is a statistical benchmark, not your actual spend. Understanding it helps you anticipate what the bank will assume.

Serviceability buffer

APRA requires lenders to assess repayments at the product rate plus a buffer — currently 3%. On a 6% rate, you are assessed at 9%. This is the single biggest factor limiting borrowing capacity.

Common mistakes

  • Keeping unused credit cards open — lenders count the full limit as a potential liability, not your actual balance.
  • Not realising HECS-HELP, BNPL commitments, and car lease payments all reduce assessed capacity.
  • Assuming two lenders will give the same borrowing figure — policies and expense models vary significantly.
  • Treating maximum borrowing power as a spending target instead of a ceiling to stay well below.

Borrowing power calculator

Estimate your borrowing capacity based on income, expenses, and existing debts.

Pre-approval planner

Work backwards from comfortable repayments to a borrowing range.

Rate stress test

See how the serviceability buffer affects your assessed repayments.

HECS impact on borrowing

How HECS-HELP repayments reduce your mortgage borrowing capacity.

Pre-approval checklist

Prepare documents and clean up liabilities before applying.

Capacity is a ceiling, not a target

Know what lenders will approve — then decide what you can actually afford.

Borrowing power tells you the maximum. Your stress-tested repayment comfort tells you the right number.

Check borrowing power

Related Guides

First Home Buyer Guide

Government grants, stamp duty concessions, and the costs most first buyers miss.

Refinancing Guide

When switching loans saves money and when break costs eat the benefit.

Buying Costs Beyond the Deposit

Stamp duty, LMI, conveyancing, and the hidden costs most buyers miss.

Frequently Asked Questions

What do Australian lenders look at when assessing borrowing power?
Income, existing debts, living expenses (using HEM benchmarks or actual declared expenses), credit history, employment stability, and the loan serviceability buffer — typically 3% above the product rate.
Why is my borrowing power lower than expected?
Common reasons include HECS-HELP repayments, credit card limits (even unused cards reduce capacity), high declared living expenses, or the serviceability buffer pushing your assessed rate well above the actual rate.
Can I increase my borrowing power?
Yes. Reducing credit card limits, paying down consumer debt, increasing genuine savings history, and lowering declared expenses can all improve your assessed borrowing capacity.