How much can I borrow? How lenders work out your borrowing power
Banks test your income, expenses and debts against a higher interest rate. Here's how the test works and what you can do to borrow more.
Key points
- Lenders test you at your loan rate plus a 3 percentage point buffer.
- Living costs are the higher of your own figure and a benchmark like HEM.
- Credit cards count by their limit, not the balance.
- Since February 2026, loans at 6× income or more are limited to 20% of each bank's new lending.
- A single person on $100,000 can borrow roughly $539,000 (indicative).
"How much can I borrow?" is the first question most home buyers ask, and the answer from a bank is often less than people expect. That's because lenders don't just look at your income. They test whether you could still afford the loan if rates rose, they assume a minimum amount for living costs, and they count debts you may not think about, like an unused credit card. Here's how it works.
Step 1: your income
Lenders start with your gross income and work out what you'd take home after tax. Base salary is usually counted in full. Less certain income, such as overtime, bonuses, commissions and rent from an investment property, is often "shaded", meaning only part of it is counted, commonly around 80%. Casual and self-employed income usually needs a longer track record.
Step 2: your living expenses
Lenders ask for your spending, then compare it with a benchmark for a household like yours, often the Household Expenditure Measure (HEM). They use whichever is higher. So cutting your declared spending below the benchmark won't increase what you can borrow, but high spending above it will reduce it. Expect lenders to check your bank statements.
Step 3: your other debts
Car loans, personal loans, buy now pay later and HECS-HELP all reduce what's left over each month. Credit cards are counted by their limit, not the balance, because you could max them out tomorrow. Our calculator counts 3.8% of the limit a month, a common lender assumption.
Step 4: the 3% serviceability buffer
APRA, the banking regulator, expects lenders to check you could still afford repayments if the interest rate were at least 3 percentage points higher than the rate you'll actually pay. On a 6% loan, you're tested at 9%. The buffer has been 3% since late 2021 and APRA left it unchanged in 2026.
Step 5: the debt-to-income limit
From February 2026, APRA introduced a limit on high debt-to-income (DTI) lending: banks can only make up to 20% of their new home loans to borrowers whose total debt is six times their income or more, measured separately for owner-occupiers and investors. It isn't a hard cap for every borrower, but in practice many lenders are cautious above 6×. Our calculator caps borrowing at 6× gross income.
What different households can borrow
Estimates from our borrowing power calculator, at a 6% interest rate tested at 9%, over 30 years, with no other debts and benchmark living expenses:
| Household | Estimated borrowing power | Monthly repayment at 6% |
|---|---|---|
| Single, $80,000 | $419,000 | $2,512 |
| Single, $100,000 | $539,000 | $3,232 |
| Single, $120,000 | $659,000 | $3,951 |
| Single, $150,000 | $828,000 | $4,964 |
| Couple, $100,000 + $80,000 | $1,006,000 | $6,031 |
| Couple, $180,000 total, 2 children | $881,000 | $5,282 |
Indicative only. Each lender sets its own policies, and your actual limit can be higher or lower.
Small things that make a big difference
For a single person on $100,000, our model estimates borrowing power of about $539,000. Then:
- A $10,000 credit card limit, even if paid off every month, cuts it to about $492,000 (down $47,000).
- A $600 a month car loan cuts it to about $464,000 (down $75,000).
How to increase your borrowing power
- Cancel or reduce credit card limits you don't need before you apply.
- Pay off small debts, such as a car loan or buy now pay later balance, if you can.
- Check your spending for a few months before applying, since lenders review statements.
- Apply jointly if you're buying with a partner. Two incomes go much further than one because living costs don't double.
- Consider a longer loan term. A 30-year loan has lower repayments than 25 years, so you can borrow more, but you'll pay more interest.
- Use government help. Since 1 October 2025 the Australian Government's 5% Deposit Scheme has no income caps and no limit on places, and lets eligible first home buyers buy with a 5% deposit (2% for single parents) without paying lenders mortgage insurance. Property price caps still apply.
- Talk to a broker. Lenders' policies differ, especially on bonuses, self-employment and HECS.
Borrowing power isn't the same as what you should borrow
The maximum a bank will lend is the amount that just passes its test. Before you borrow that much, check the repayments fit your budget with room for rate rises, a new baby, a job change or repairs. A good rule of thumb is to make sure you could still manage if your rate went up by 2 to 3 percentage points.
Frequently asked questions
How much can I borrow on a $100,000 salary?
About $539,000 as a single applicant with no debts, using our calculator's assumptions (6% rate tested at 9%, 30 years). Lenders vary.
What is the serviceability buffer?
APRA expects banks to test whether you could afford repayments at an interest rate at least 3 percentage points above your actual rate.
Do credit cards reduce how much I can borrow?
Yes. Lenders count a monthly repayment on the full limit, even if you pay the card off each month. Reducing limits before you apply can help.
Sources
- APRA: activating debt-to-income limits
- Moneysmart: home loans
- Moneysmart: buying a house
- Housing Australia: 5% Deposit Scheme fact sheet (1 October 2025)
More guides
Last reviewed October 2026. This guide is general information only. It isn't financial, tax, credit or legal advice and doesn't consider your circumstances. Rules change, so check the official sources below or speak to a licensed professional before you make a decision.