Borrowing capacity (also called borrowing power) is the largest loan a lender is prepared to approve for you. It is the output of the lender's serviceability calculator: your income, less your living expenses and existing commitments, tested against repayments at a rate higher than the one you will actually pay.
What Drives Your Borrowing Capacity
Things that increase it:
- Higher, stable income (permanent full-time income is counted most generously)
- Additional income the lender will accept, such as rent, overtime or bonuses (often shaded)
- A second applicant's income
- Low declared living expenses that match your bank statements
Things that reduce it:
- Existing loan repayments (car, personal, other home loans)
- Credit card limits, even if the balance is zero
- Buy now pay later accounts
- HECS/HELP debt
- Dependants
- A longer-term or higher-rate existing debt
Why Two Lenders Give Two Different Numbers
Every lender runs its own calculator. They differ on:
- The assessment buffer added to the actual rate
- How much of your rent, bonus or overtime they count
- Expense floors, the minimum living cost they assume for your household size
- Debt-to-income limits, which can cap the loan even when the calculator says yes
It is common for the same borrower to see a gap of tens of thousands of dollars between lenders. A broker compares these before you apply, so a decline does not end up on your credit file.
How to Increase Your Borrowing Capacity
- Close unused credit cards or reduce their limits
- Pay off small debts such as a car loan or personal loan
- Close buy now pay later accounts you no longer use
- Tidy your spending for three months before applying, since lenders read your statements
- Choose the right lender for your income type
Estimate Yours
Use the borrowing power calculator for a quick estimate, then speak to a NIK Finance broker to see how your figure changes across lenders.