How Much Can I Borrow for a Home Loan in Australia?

How Lenders Calculate Your Borrowing Power

When you apply for a home loan, the lender runs what is called a serviceability assessment. In simple terms, they want to know if you can afford the repayments. Not just at today's rate, but if rates go up in the future.

Here is what they look at.

• Your gross income (before tax) from all sources, including salary, bonuses, overtime, rental income, and government payments.
• Your existing debts, including credit card limits (not just balances), personal loans, car loans, HECS/HELP, and buy now pay later accounts.
• Your living expenses, either what you declare or a benchmark figure they calculate (more on this below).
• The number of dependents you have.
• The loan term, interest rate, and type of loan you are applying for.

They put all of this into their assessment model and out comes a number. That number is the maximum they believe you can comfortably repay.

The APRA 3% Serviceability Buffer

This is one of the biggest factors affecting how much you can borrow, and most people have never heard of it.

APRA (the Australian Prudential Regulation Authority) is the government body that oversees banks and lenders. They require all lenders to test whether you can afford repayments at a rate 3% higher than the actual loan rate.

So if a lender offers you a rate of 6.0%, they will assess your ability to repay at 9.0%. This is called the serviceability buffer. It exists to protect you (and the bank) in case rates rise after you take out the loan.

The practical effect is significant. A couple earning $150,000 combined might be able to afford repayments on a $700,000 loan at 6.0%. But when the lender tests them at 9.0%, the maximum drops to something closer to $550,000. That 3% buffer can reduce your borrowing power by 20% to 25%.

There is nothing you can do to change this rule. It applies to every lender in Australia. But understanding it helps you set realistic expectations before you start your property search.

Debt-to-Income Ratio Limits

In early 2026, APRA introduced new guidance on debt-to-income (DTI) ratios. Banks are now limited to having no more than 20% of their new lending at a DTI ratio above 6.

What does that mean for you? Your DTI ratio is your total debt divided by your gross annual income. If you earn $100,000 and want to borrow $600,000, your DTI is 6.0. If you already have a $20,000 car loan, your total debt would be $620,000 and your DTI jumps to 6.2.

Lenders are not banned from approving loans above a DTI of 6, but they have limited capacity to do so. This means high-debt applications face more scrutiny and are more likely to be declined or reduced.

The takeaway? Reducing your existing debts before applying is more important than ever.

How Your Expenses Affect the Outcome

Lenders look at your living expenses in two ways.

First, they ask you to declare your monthly expenses when you apply. This includes rent, groceries, utilities, insurance, subscriptions, childcare, and everything else you spend money on.

Second, they compare your declared expenses to a benchmark called the Household Expenditure Measure (HEM). HEM is a statistical measure of what Australian households typically spend based on family size and income. The lender uses whichever figure is higher.

So even if you are a careful saver who spends very little, the lender will use the HEM floor as a minimum. On the other hand, if your bank statements show higher spending, that is the number they will use instead.

This is why some people are surprised by their borrowing capacity. You might feel comfortable with higher repayments, but the lender sees your expenses and uses a more conservative number.

Single vs Joint Income and Self-Employed Borrowers

Buying with a partner nearly doubles your borrowing power because the lender counts both incomes against the same set of shared expenses. A couple earning $80,000 each will generally borrow much more than a single person earning $160,000, because two incomes are seen as lower risk than one.

Self-employed borrowers

If you are self-employed, the assessment is a bit different. Lenders typically want to see two years of tax returns and a Notice of Assessment from the ATO. Some lenders accept one year of financials if you have a strong profile.

They will look at your net business income (not revenue) and may average it over two years. If your income dropped last year, that average could pull your borrowing capacity down. If your income has been growing, some lenders will weight the more recent year more heavily.

Having a good accountant and clean financials makes a real difference here. If your tax returns show low income because of aggressive deductions, that is exactly what the lender sees too.

How to Increase Your Borrowing Capacity

There are some practical steps you can take to improve your number before you apply.

• Close unused credit cards. Even if the balance is zero, the lender counts the full credit limit as a potential debt. A $10,000 credit card limit can reduce your borrowing capacity by roughly $30,000 to $50,000.
• Pay down or pay off personal loans and car loans. Every dollar of existing debt reduces the amount a lender will offer you.
• Cancel buy now pay later accounts (Afterpay, Zip, etc.). Lenders now assess these as ongoing commitments.
• Reduce your declared living expenses. Review your spending for three months before applying. Cut subscriptions and discretionary spending that you can live without.
• Consider a longer loan term. A 30-year loan has lower monthly repayments than a 25-year loan, which means the lender will approve a higher amount. You can always make extra repayments to pay it off faster.
• Apply jointly with a partner if possible. Two incomes significantly increase capacity.
• Shop around. Different lenders use different assessment models. One lender might approve you for $600,000 while another approves $650,000 with the same financial profile. Our Lenders page shows you who is out there.

Worked Examples at Different Income Levels

These are rough estimates based on typical lender assessments. Your actual number will depend on your specific expenses, debts, and the lender you choose.

Notice how the couple with $15,000 in credit card limits (even if the balances are zero) has a lower range than the couple with no debts but two children. Existing credit limits have a surprisingly large impact.

These numbers are estimates. To get a figure based on your actual situation, try our Borrowing Capacity Calculator. It takes about 60 seconds and gives you a personalised result.