Quick Answer
As a general guide, most Australian lenders allow you to borrow between 5 and 7 times your gross annual income. A single borrower earning $100,000 per year can typically borrow between $500,000 and $700,000, depending on their expenses, existing debts and the lender's serviceability criteria. Couples can combine their incomes. These figures assume no significant debts and standard living expenses.
These are general estimates only. Actual borrowing power varies significantly by lender. Some lenders are more generous with certain income types (overtime, bonuses, rental income). A broker can identify which lender gives you the best result for your specific situation.
Borrowing Power by Income
The table below shows estimated borrowing power ranges for different income levels. These assume no existing debts, no dependents, standard living expenses and a 30-year loan term at current market rates.
| Gross Annual Income | Single Borrower (est.) | Couple (combined, est.) |
|---|---|---|
| $60,000 | $300,000 - $420,000 | N/A |
| $80,000 | $400,000 - $560,000 | $560,000 - $780,000 |
| $100,000 | $500,000 - $700,000 | $700,000 - $980,000 |
| $120,000 | $600,000 - $840,000 | $840,000 - $1,175,000 |
| $150,000 | $750,000 - $1,050,000 | $1,050,000 - $1,470,000 |
| $200,000 | $1,000,000 - $1,400,000 | $1,400,000 - $1,960,000 |
Estimates assume no existing debts, no dependents, standard living expenses and a 30-year loan term. Actual amounts vary by lender.
How Lenders Calculate Your Borrowing Power
Every Australian lender runs a serviceability assessment before approving a home loan. While the exact methodology varies between lenders, the core process is the same.
Step 1: Assess your income. Lenders look at your base salary, overtime, bonuses, commissions, rental income and investment income. Not all income is counted at 100%. Most lenders shade variable income (overtime, bonuses, commissions) to 80%, meaning they only count 80% of that income in their assessment.
Step 2: Deduct your living expenses. Lenders use either the Household Expenditure Measure (HEM) benchmark or your actual declared expenses, whichever is higher. HEM is a statistical benchmark based on ABS data that estimates minimum living costs for your household size and income level.
Step 3: Deduct existing debt commitments. All existing debts reduce your borrowing power. Credit card limits are assessed at approximately 3.8% of the total limit per month (regardless of the balance). Car loans, personal loans and HECS-HELP repayments are all deducted from your available income.
Step 4: Apply the interest rate buffer. APRA requires lenders to assess your ability to repay at a rate 3% above the actual loan rate. If the loan rate is 6.00%, the lender must confirm you can afford repayments at 9.00%.
Step 5: Calculate the maximum loan. The remaining income after all deductions determines your maximum monthly repayment. From this, the lender calculates the maximum loan amount you can service over the chosen term.
Different lenders use different expense benchmarks and income shading. This is why your borrowing power can vary by $50,000 to $150,000 between lenders. A broker compares across 60+ lenders to find where your income is assessed most favourably.
The 3% Serviceability Buffer
Since October 2021, APRA (the Australian Prudential Regulation Authority) has required all regulated lenders to assess borrowers at a minimum interest rate buffer of 3% above the loan product rate. This buffer is designed to ensure borrowers can still afford their repayments if interest rates rise.
In practice, this means if your home loan rate is 6.00%, the lender must assess your ability to make repayments at 9.00%. This significantly reduces borrowing power compared to the pre-2021 environment when a lower buffer was used.
For example, on a $600,000 loan over 30 years, the monthly repayment at 6.00% is approximately $3,597. At the assessed rate of 9.00%, the repayment is $4,828. The lender needs to be satisfied you can afford the higher figure.
Some non-bank lenders, which are not regulated by APRA, may use a slightly different buffer methodology. This can result in marginally higher borrowing power in some cases. A broker can advise whether this is relevant to your situation.
What Reduces Your Borrowing Power
Several factors reduce the amount a lender will allow you to borrow. Understanding these before you apply gives you the opportunity to address them.
Credit card limits. Even if your credit card has a zero balance, lenders assess approximately 3.8% of the total limit as a monthly commitment. A card with a $10,000 limit is treated as a $380 per month liability, whether you use it or not.
HECS-HELP debt. Your HECS repayment obligation is deducted from your gross income. The repayment rate depends on your income level. Higher earners have larger mandatory repayments, which reduces borrowing capacity.
Existing car loans and personal loans. All existing loan repayments are deducted from your available income. Even small monthly commitments reduce your maximum loan amount.
Dependents. Each dependent child reduces your borrowing capacity by roughly $3,000 to $5,000 per year in living expense allowance, depending on the lender's HEM benchmark for your household size.
Buy Now Pay Later accounts. Some lenders now treat active BNPL accounts as liabilities, reducing your borrowing power. Others require you to close BNPL accounts before approval.
High living expenses. If your actual declared expenses exceed the HEM benchmark for your household, the lender uses the higher figure, reducing your capacity further.
Closing unused credit cards before applying can increase your borrowing power by $15,000 to $30,000 per card, depending on the limit. This is one of the simplest and most effective ways to boost your capacity.
What Increases Your Borrowing Power
If you need to borrow more, there are several strategies that can increase your assessed borrowing capacity.
Higher income. Overtime, bonuses and commissions are typically counted at 80% by most lenders. If you have consistent variable income, providing evidence of at least 12 months of history strengthens the assessment.
Rental income from investment properties. Rental income is generally shaded to 80% and added to your assessable income. If you own investment property, this can meaningfully increase your borrowing power.
Applying with a co-borrower. Combining incomes with a partner or spouse significantly increases borrowing capacity. Two incomes of $80,000 typically produce higher borrowing power than a single income of $160,000, because the living expense benchmark for a couple is less than double the single benchmark.
Choosing a longer loan term. A 30-year loan term produces lower assessed monthly repayments than a 25-year term, which increases the maximum loan amount. You can always make extra repayments to pay it off sooner.
Reducing existing debts before applying. Paying off car loans, personal loans and closing unused credit cards before your application removes liabilities from the assessment.
Using a lender with favourable serviceability criteria. Not all lenders assess income and expenses identically. A broker can identify which lender gives you the most favourable assessment for your specific income mix and circumstances.
Government guarantor schemes. The Family Home Guarantee allows single parents to purchase with just 2% deposit, removing the LMI barrier and allowing more of your savings to remain as a buffer.
First Home Buyers
First home buyers in Australia have access to several government schemes that can make purchasing more accessible.
First Home Guarantee. Eligible first home buyers can purchase a property with just a 5% deposit and no Lenders Mortgage Insurance (LMI). The government guarantees the difference between your deposit and 20%, saving you thousands in LMI costs. For a full breakdown of eligibility and how to apply, see our complete first home buyer guide.
Family Home Guarantee. Single parents (including separated parents with dependents) can buy with as little as a 2% deposit and no LMI, under a similar government guarantee structure.
First Home Owner Grant (FHOG). A one-off grant available in each state and territory for eligible first home buyers purchasing or building a new home. The amount varies by state. See our FHOG guide by state for current amounts and eligibility.
Stamp duty concessions. Most states offer stamp duty reductions or exemptions for first home buyers below certain price thresholds. These can save tens of thousands of dollars on your purchase.
Some lenders also offer dedicated first home buyer products with more favourable serviceability criteria or reduced fees. A broker can help identify these options.
Self-Employed Borrowers
Borrowing as a self-employed individual requires a different approach. Lenders assess self-employed income differently from PAYG salary, and the documentation requirements are more extensive.
Standard assessment. Most lenders require two years of personal and business tax returns, along with financial statements (profit and loss, balance sheet). Your assessable income is typically the average net profit over the two-year period, with adjustments for depreciation and one-off expenses that are added back.
Low doc options. Some lenders offer low documentation loans for self-employed borrowers who cannot provide two full years of financials. These typically carry a rate premium of 1% to 2% and may have lower maximum LVRs. They usually require a minimum of 12 months of business activity statements (BAS) or business bank statements.
ABN history. Most lenders require your ABN to have been registered for at least two years. Some specialist lenders will consider applications with 12 months of ABN history if other factors are strong.
Income calculation. Self-employed income is calculated differently from PAYG. Lenders often allow add-backs for depreciation, one-off business expenses and sometimes even director's superannuation contributions. This can significantly increase your assessed income compared to what appears on your tax return.
If you are self-employed, working with a broker experienced in self-employed applications is essential. The difference between a well-structured application and a poorly structured one can be the difference between approval and decline.
Find Out Your Borrowing Power
Every borrower's situation is different. Talk to a licensed mortgage broker who can assess your specific income, expenses and debts across 60+ lenders to find your maximum borrowing capacity, at no cost to you.
Check My Borrowing Power →