How much can I borrow for a home loan?

"How much can I borrow?" is usually the first question anyone asks about a home loan, and the honest answer is: it depends on how a lender reads your whole financial position, not just your salary. Two people on identical incomes can have very different borrowing power once expenses, debts and family circumstances are factored in. This guide walks through the levers that actually move the number, so the estimate you get from our [borrowing capacity calculator](/calculators/borrowing-capacity) makes sense — and so you know what a lender will look at when it counts.

The short version: serviceability

Lenders in Australia must lend responsibly under the National Consumer Credit Protection Act (NCCP). In practice that means they run a serviceability assessment: can you comfortably afford the repayments on the loan you are asking for, even if rates rise? They start with your income, subtract your living expenses and existing debt commitments, apply a buffer to the proposed repayments, and see what is left over. If the surplus is positive with room to spare, the loan services. The maximum loan is simply the largest amount that still passes that test.

Income: not all dollars count equally

Your base salary is the anchor, but lenders treat different income types differently:

• PAYG base salary is generally accepted in full (assessed net of tax).
• Overtime, bonuses and commission are usually only partially counted — lenders often "shade" them, using a percentage of the amount and looking for a consistent history.
• Casual and contract income typically needs a track record, often six to twelve months in the same role or industry.
• Self-employed income is usually averaged across one or two years of tax returns and financials.
• Rental income from investment properties is shaded too, to allow for vacancies and costs.
• Government benefits such as Family Tax Benefit may count with some lenders, depending on the ages of your children.

Because each lender has its own policy on all of this, the same payslip can support quite different loan sizes at different lenders. That policy variation is one of the main reasons [a broker can help](/articles/home-loans/how-brokers-help).

Expenses and the HEM benchmark

Lenders compare your declared living expenses against a benchmark — most use a version of the Household Expenditure Measure (HEM), which estimates typical spending for a household of your size, location and income. They then use the higher of your declared expenses or the benchmark. You cannot borrow more by understating your spending; if your bank statements show higher outgoings than you declared, the lender will question it. Dependants matter here too: each child increases the benchmark, which directly reduces borrowing power.

Existing debts: the quiet borrowing-power killers

Every existing commitment reduces what is left to service a home loan:

• Credit cards are assessed on the limit, not the balance. A $20,000 limit you never use is still treated as if you could max it out tomorrow.
• Car loans and personal loans count at their full repayment.
• HECS/HELP debt reduces your net income, because compulsory repayments come out of your pay.
• Buy now, pay later accounts and any regular repayment obligations are increasingly visible to lenders through bank statements and credit reports.

Closing an unused card or paying out a small [personal loan](/loans/personal-loans) before applying can lift your capacity more than people expect.

The buffer rate: why you are assessed above today's rate

Lenders do not assess your repayments at the actual interest rate you will pay. Under regulator guidance they add a serviceability buffer — typically around 3 percentage points above your actual rate. So if your loan is offered at one rate, the lender tests whether you could still afford repayments at a rate roughly 3 points higher. This is a deliberate safety margin against rate rises and life changes, and it is the single biggest reason your borrowing power is lower than a back-of-envelope calculation suggests. The buffer applies to your existing loans too when you refinance or buy again.

Why online calculators all give different answers

If you have tried three bank calculators and got three numbers, nothing is wrong with you. Calculators differ because each one bakes in different assumptions: the buffer rate used, how expenses are estimated, whether bonus income is shaded, how credit card limits are treated. Bank calculators also tend to be simplified marketing tools — the real assessment happens in the lender's credit engine with your verified documents. Treat any calculator, including our [borrowing capacity calculator](/calculators/borrowing-capacity), as a well-informed estimate that tells you the ballpark, not a pre-approval. If you want to understand your result in detail, see our guide to [reading borrowing power results](/articles/home-loans/understanding-borrowing-power-results).

How to increase your borrowing power

Some levers are genuinely within your control:

• Reduce or close credit card limits you do not need.
• Pay out small consumer debts before applying.
• Tidy your spending in the three months before applying, since statements may be reviewed.
• Consider whether both applicants' income situations are stable and documented.
• Compare lenders — policy differences on overtime, casual income or HECS can change the outcome materially.

What does not help: understating expenses, hiding debts, or inflating income. Lenders verify, and discrepancies damage the application. Our guide to [common application mistakes](/articles/credit-and-approval/loan-application-mistakes) covers what to avoid.

Talk it through with a broker

A calculator gives you a starting point; a broker can tell you which lender's policy actually suits your income and situation, and what number you can realistically plan around. [Get in touch](/contact) for a no-obligation chat about your borrowing power.