"How much can I borrow?" is the first question almost every home buyer asks — and the honest answer is: it depends. Your borrowing capacity is influenced by your income, debts, living expenses, the number of people in your household, and how lenders assess all of these together.
This guide explains how home loan borrowing capacity works in Australia in 2026, what you can do to maximise it, and how to get a real number specific to your situation.
How Lenders Calculate Your Borrowing Capacity
Australian lenders are required by APRA (the banking regulator) to assess loan applications conservatively. The key requirement is that borrowers are assessed at a buffer rate of 3% above the loan's current interest rate.
In 2026, with variable rates around 5.5%–7.0% p.a., lenders assess your ability to repay at 8.5%–10.0% p.a. This buffer protects both the borrower and the financial system from rate increases.
The calculation:
Borrowing capacity = (Net assessable income × Expense ratio) ÷ Monthly repayment at buffer rate
In practice, lenders use proprietary models that consider:
- Gross income from all sources (salary, business income, rental income, dividends)
- HECS/HELP debt repayments
- Other loan repayments (car, personal)
- Credit card limits (typically assessed at 3% of limit per month, regardless of balance)
- Living expenses (lenders use a benchmark floor — typically HEM — or your actual declared expenses, whichever is higher)
- Number of dependants
Indicative Borrowing Capacities in 2026
These figures assume: owner-occupier, principal and interest loan, no existing debts, assessed at 6.5% p.a. with standard lender HEM expenses.
| Gross Annual Income | Approx. Borrowing Capacity | |---------------------|---------------------------| | $70,000 | $380,000–$430,000 | | $90,000 | $490,000–$560,000 | | $120,000 | $660,000–$750,000 | | $150,000 | $830,000–$950,000 | | $200,000 | $1,100,000–$1,250,000 | | $120k + $80k (couple) | $1,050,000–$1,200,000 | | $150k + $100k (couple) | $1,400,000–$1,600,000 |
These are estimates. Your actual capacity may be higher or lower depending on debts, expenses, and lender-specific policies.
What Reduces Your Borrowing Capacity?
Understanding what lowers your capacity helps you address it before applying.
HECS/HELP debt: Your HECS repayment is included in your living expenses. If you have a $60,000 HECS debt, the minimum compulsory repayment (approximately $3,000–$4,000/year) reduces your assessed capacity. Paying off HECS before applying can increase your capacity by $50,000–$100,000.
Credit card limits: Lenders include 3% of your total credit card limit as a monthly repayment obligation, regardless of whether you carry a balance. A $20,000 credit card limit reduces your capacity by the equivalent of a $600/month commitment. Cancelling unused credit cards before applying is a simple way to increase your capacity.
Car and personal loans: Existing loan repayments directly reduce what's available for a mortgage repayment. Paying out debts before applying improves capacity.
Number of dependants: Each dependant child increases the assumed living expense floor. Some lenders assess this differently.
Part-time or casual income: If part of your income is part-time, casual, or overtime, some lenders shade this income (use only 80% of it) in their assessment. Full-time permanent income is assessed at 100%.
What Increases Your Borrowing Capacity?
Joint application: Combining incomes with a partner or co-buyer is the single biggest lever. Two incomes assessed together can roughly double the borrowing capacity compared to a single income.
Paying down debts: Every dollar of monthly debt repayment removed increases capacity by approximately $5–$8 in loan amount. Paying off a $300/month car loan might increase your home loan capacity by $20,000–$25,000.
Cancelling unused credit cards: As above — reduces assessed liabilities without affecting your cash flow.
HECS repayment: If your HECS balance is manageable and you have the savings, clearing it before applying can meaningfully increase capacity.
Rental income: If you own investment property, net rental income (after expenses) contributes to your assessable income, increasing capacity.
Bonus income and overtime: Not all lenders treat bonuses equally. Some include 100%, some include 80%, some exclude them. A broker finds the lender who best recognises your income type.
Borrowing Capacity vs How Much You Should Borrow
These are not the same question. Lenders will offer you up to your maximum capacity — but that doesn't mean you should borrow it.
A sensible rule: your mortgage repayment should not exceed 30–35% of your gross income. Beyond that, you're "housing stressed" by most definitions, with limited buffer for rate increases, unexpected expenses, or life changes.
Use the following stress test: calculate your repayment at 8% (about 1.5% above current rates). If that's still within 35% of gross income, you have reasonable buffer.
Borrowing Capacity for Self-Employed Borrowers
Self-employed borrowers are assessed differently. Most lenders use your taxable income (from tax returns) after add-backs for:
- Depreciation
- One-off non-recurring expenses
- Superannuation contributions above SGC
For self-employed borrowers with complex structures, working with a broker experienced in self-employed lending is essential. The difference between lenders in how they assess self-employed income can be $100,000–$300,000 in borrowing capacity.
Different Lenders, Different Capacities
Lenders don't all assess capacity the same way. HEM benchmarks vary. Treatment of rental income varies. Treatment of allowances, overtime, and business income all differ.
The same borrower might be assessed at $800,000 capacity by one lender and $950,000 by another — purely due to policy differences. This is a primary reason to use a broker: we know which lenders will maximise your capacity for your specific income profile.
Frequently Asked Questions
Can I borrow more if I provide more documentation? In some cases, yes. Providing comprehensive documentation (detailed BAS, bank statements, P&L) gives the lender more confidence and may unlock higher assessed capacity, particularly for self-employed applicants.
Does a larger deposit increase my borrowing capacity? A larger deposit reduces the loan amount needed (which may help you avoid LMI), but it doesn't directly increase the maximum loan a lender will offer. Your income and expenses determine capacity.
How does an investment property affect my borrowing capacity for a new home? Rental income from an investment property is added (at 70–80% of gross rent) and existing investment loan repayments are deducted. Net effect depends on your specific numbers.
Will using a BNPL service (like Afterpay) affect my home loan application? Lenders are increasingly looking at BNPL usage as a lifestyle indicator. Significant or frequent BNPL use can raise red flags even if balances are $0. Reducing BNPL use 3–6 months before applying is advisable.
How do I find out my exact borrowing capacity? The fastest path is a broker pre-assessment. Fill out our form at nik.finance and we'll provide a personalised borrowing capacity estimate and identify the right lenders for your situation — same day.
Find Out Exactly What You Can Borrow
Get a real, personalised borrowing capacity assessment — not an online estimate. Fill out our 2-minute form at nik.finance and our mortgage brokers will assess your full situation and tell you exactly what you can borrow and which lenders to approach.
NIK Finance holds an Australian Credit Licence. Borrowing capacity figures are illustrative only. Actual assessments are subject to full lender credit assessment.