Buying a home is one of the biggest financial decisions you'll ever make.
Before you start browsing properties, the most important question to answer
is: how much can I actually borrow?
The answer depends on several factors — your income, expenses, debts,
deposit size, and the lender you choose. This guide breaks it all down
using current 2025-26 figures.
## The Basic Rule of Thumb
Most Australian lenders will lend between 4x and 6x your gross annual
income. For example:
- $80,000 salary → borrow approximately $320,000–$480,000
- $120,000 salary → borrow approximately $480,000–$720,000
- $150,000 combined → borrow approximately $600,000–$900,000
This is just a starting point. Your actual borrowing capacity depends on
a more detailed assessment.
## How Lenders Calculate Your Borrowing Capacity
Australian lenders use a process called serviceability assessment. They
look at three main things:
### 1. Your Income
Lenders count different income types differently:
- PAYG salary: 100% counted
- Casual or contract income: 80–100% depending on history
- Rental income: 70–80% counted
- Overtime and bonuses: 50–80% depending on consistency
- Self-employment income: averaged over 2 years of tax returns
### 2. Your Expenses
Since 2019, lenders must use the Household Expenditure Measure (HEM)
as a minimum benchmark for living costs. They will use whichever is
higher — your declared expenses or HEM. The HEM varies by location
and family size but typically ranges from $2,000 to $4,500 per month.
### 3. Your Existing Debts
Every dollar of existing debt reduces your borrowing power. Lenders
assess:
- Credit card limits (not just balances — even unused limits count)
- Personal loans
- Car loans
- HECS/HELP debt
- Buy Now Pay Later obligations
A $10,000 credit card limit can reduce your borrowing capacity by
approximately $50,000–$60,000, even if you never use it.
## The Serviceability Buffer
Since October 2021, APRA requires all lenders to assess whether
borrowers can afford repayments at the loan rate plus a 3% buffer.
With the current RBA cash rate at 4.35% (May 2026) and typical
variable rates around 6.5%, lenders are stress-testing your loan
at approximately 9.5%.
This buffer significantly reduces how much you can borrow compared
to a few years ago.
## Deposit and LVR Requirements
Your Loan-to-Value Ratio (LVR) is the loan amount as a percentage
of the property value. It directly affects your borrowing options:
- LVR below 80% (20%+ deposit): No Lenders Mortgage Insurance (LMI),
best rates available
- LVR 80–90% (10–20% deposit): LMI required, adds cost to your loan
- LVR 90–95% (5–10% deposit): LMI required, fewer lenders available
LMI can cost anywhere from $5,000 to $30,000+ depending on your
loan size and LVR.
## First Home Buyer Schemes
If you're a first home buyer, you may be eligible for schemes that
help you borrow more with a smaller deposit:
- **First Home Guarantee**: Buy with as little as 5% deposit with
no LMI (government guarantees the rest)
- **First Home Super Saver Scheme**: Use voluntary super contributions
toward your deposit
- **State-based grants**: Vary by state, typically $10,000–$30,000
for new builds
## What Reduces Your Borrowing Power?
Several factors can significantly reduce how much you can borrow:
- High existing debts and credit card limits
- Irregular or casual employment history
- Low credit score (below 600)
- Large number of recent credit enquiries
- Being self-employed with inconsistent income
- Having dependants (reduces HEM allowance)
- High RBA cash rates (currently 4.35%)
## How to Maximise Your Borrowing Capacity
If you want to borrow more, consider these steps before applying:
1. **Cancel unused credit cards** — reduces assessed liabilities
2. **Pay down personal loans and car loans** — directly improves
serviceability
3. **Close BNPL accounts** — Afterpay and Zip are now assessed
by most lenders
4. **Avoid new credit enquiries** — each one slightly lowers your
credit score
5. **Save a larger deposit** — reduces LVR and removes LMI costs
6. **Wait for stable employment** — 6–12 months in the same job
strengthens your application
7. **Salary sacrifice into super** — can reduce your taxable income
and improve your net position
## How Much Can You Borrow? Calculate It Now
Every situation is different. Use our free Mortgage Calculator to
estimate your repayments based on your loan amount, interest rate,
and term — then speak with a licensed mortgage broker to get a
personalised borrowing capacity assessment.
*Results from any calculator are estimates only and do not
constitute financial advice. Lending criteria, interest rates, and
government schemes are subject to change. Please consult a licensed
mortgage broker or financial adviser before making any financial
decisions.*
Try our Mortgage Calculator
Calculate home loan repayments and total interest