Updated October 2026 · General information for Australian home buyers.
Every borrower asks the same question: "How much will the bank lend me?" It's the most-searched home loan question in Australia for a reason. The honest answer is it depends, which is also what your accountant says about everything. Let's turn that into something useful.
What "borrowing power" actually means
Your borrowing power (or borrowing capacity) is the most a lender is willing to lend you, based on whether they believe you can keep up repayments. It's an estimate of the bank's risk, not a recommendation of what you should borrow. MoneySmart, ASIC's consumer website, makes the same point: focus on what you can comfortably afford, not just the maximum.
The 3% stress test
APRA, the banking regulator, requires lenders to assess your ability to repay at a rate at least 3 percentage points above the actual loan rate. On 28 May 2026, APRA confirmed the buffer stays at 3 points. So if your loan rate is 6%, the bank asks "could you afford it at 9%?" That's why online calculators can surprise you: they're not testing today's repayment, they're testing a bad day.
Since 1 February 2026 there's also a limit on high debt-to-income (DTI) lending: banks can write only up to 20% of new loans at a total debt of six times income or more. In practice, borrowing at 6x your income is possible but harder, and lenders may say no or ask more questions.
What lenders look at
- Income: base salary, plus other income at a haircut. Bonuses, overtime, commissions and rental income are often shaded (counted at a percentage) because they're less certain.
- Living expenses: lenders check your spending against benchmarks and your bank statements. "I eat out rarely" and a statement full of takeaway deliveries will not agree.
- Existing debts: car loans, personal loans, Buy Now Pay Later and credit card limits (not balances). A $15,000 limit you never touch can still reduce your borrowing power by a meaningful amount.
- HECS/HELP: compulsory repayments reduce your take-home pay and your capacity.
- Dependants and household: more mouths, more expenses.
- Loan type and term: a longer term lowers the repayment (and can lift capacity) but costs more interest over time.
- Deposit and LVR: a bigger deposit doesn't directly lift your income-based capacity, but it reduces what you need to borrow and can unlock better rates and lenders.
- Credit history: defaults, late payments and frequent credit enquiries count against you.
A quick, rough example
Suppose a couple earns a combined $180,000, has no other debts, and one $10,000 credit card limit. Depending on the lender, spending and rate, their capacity could land somewhere well into the high six figures. Cancel the unused card, clear a car loan, or reduce declared expenses, and the number can move by tens of thousands of dollars. Two different lenders can also give two very different answers on identical paperwork, because each has its own policies. (This is an illustration only, not a quote.)
How to lift your borrowing power: checklist
- Reduce or close unused credit cards and drop limits you don't need
- Pay off or consolidate small debts (personal loans, car loans, BNPL)
- Track your spending for 3–6 months and trim the obvious leaks
- Avoid making multiple loan or credit applications in a short period
- Check your credit report for errors before applying
- Have a clean run of bank statements (no overdrawn accounts, gambling, repeated late fees)
- Consider a longer loan term or a lender with a more flexible assessment of your income
- Speak to a mortgage broker to compare lender policies, since some assess certain incomes or HECS more generously
- Ask whether you could include a guarantor or co-borrower
Borrow what you can vs what you should
A useful test from consumer guidance: stress-test yourself. If rates went up by 2%, could you cover repayments, bills and your life? If your answer is "only if I never leave the house", you've borrowed too much. Include the ongoing costs people forget: council rates, water, insurance, repairs, and (for apartments) owners corporation fees.
Calculators: friend or foe?
Calculators are great for ballparking, and they often assume ideal conditions. They can't read your payslips or your spending habits. Use the MoneySmart mortgage and borrowing tools, then confirm with a lender or broker. One more tip: pre-approval isn't a guarantee. It's conditional on your finances staying the same and the property valuing up.
What to bring to a borrowing power chat
- Last two or three payslips (or last two years' tax returns if self-employed)
- 3–6 months of bank statements and credit card statements
- Details of every debt, including limits and repayments
- Details of dependants and rent/living costs
- Your savings and deposit figure
A joke to keep it friendly
A bank's "maximum borrowing power" is like a buffet's "all you can eat". It tells you what's available, not what's wise. Your future self, wearing the same pants, will thank you for stopping at a sensible plate.
Official links
- MoneySmart (ASIC), home loan and budgeting tools: https://moneysmart.gov.au
- MoneySmart budget planner: https://moneysmart.gov.au/budgeting/budget-planner
- APRA, macroprudential policy update (28 May 2026): https://www.apra.gov.au
- Housing Australia (if using the First Home Guarantee): https://www.housingaustralia.gov.au
Disclosure and Disclaimer
This article is general information only and is not financial, credit, legal, tax or investment advice. It does not consider your objectives, financial situation or needs. Examples are illustrations, not quotes, and lender policies, regulatory settings and interest rates change often. Please do your own research and obtain independent advice from a licensed financial adviser, mortgage broker, accountant and conveyancer or solicitor before making any decision. Loan approvals are subject to lender criteria. To the maximum extent permitted by law, our business, its directors, employees and brokers accept no liability for any loss or damage arising from reliance on this article.
Disclaimer: The information in this article is general in nature and does not constitute personal financial or credit advice. Speak with Amber Finance so we can look at your own situation in detail.