"How much can I borrow?" is usually the first question in any home loan conversation, and it's more complicated than income multiplied by some simple factor. Lenders run a full serviceability assessment, and understanding what's actually in that assessment explains why your borrowing power might be very different from a colleague on the same salary.
It's not just your income
Lenders start with your income, but what they subtract from it matters just as much:
- Living expenses — either what you declare, or a standard benchmark, whichever is higher.
- Existing debts — car loans, personal loans, HECS/HELP, and other structured repayments.
- Credit card limits — assessed on your full limit, not your balance.
- Dependants — more dependants means a higher assumed living cost.
The living expense benchmark (HEM)
Most lenders use the Household Expenditure Measure (HEM) — a benchmark published quarterly, based on Australian Bureau of Statistics spending data — as a floor for your living expenses. If you declare expenses lower than the benchmark for your household type, the lender uses the higher benchmark figure instead. It doesn't work the other way: declaring expenses honestly never hurts you, since the benchmark is a floor, not a ceiling.
The exact tables banks use are commercially licensed and not published, but the pattern is consistent: the benchmark rises with household size and with income, though less than linearly at higher incomes.
The serviceability buffer
Lenders don't assess you at today's interest rate. Regulatory guidance requires them to test whether you could still make repayments if rates were roughly 3 percentage points higher than the rate you'd actually pay. This buffer exists to make sure borrowers aren't stretched to the point where a rate rise would put them in genuine difficulty — but it also means the number a lender calculates is always more conservative than a simple repayment estimate would suggest.
This is why our borrowing power calculator uses your entered rate plus a 3% buffer to estimate your capacity — it's modelling the same test a real lender applies, not just your repayment at today's rate.
What actually moves the number
Reducing unused credit card limits
A credit card you rarely use but haven't closed is still assessed as a real monthly commitment. Reducing limits before you apply is one of the highest-impact, lowest-effort changes available.
Consolidating multiple small debts
Several smaller debts — a car loan, a personal loan, a "buy now pay later" account — can sometimes be assessed more harshly in aggregate than a single consolidated facility. This varies by lender and isn't universal, so it's worth modelling before acting.
Choosing the right lender for your profile
HEM overlays, buffer application, and treatment of income types (bonuses, rental income, overseas income) vary meaningfully between lenders. It's common to see borrowing capacity differ by tens of thousands of dollars for the exact same person, depending purely on which lender assesses the file. This is the core reason to compare across a panel rather than approaching one bank directly.
A realistic starting point
Our borrowing power calculator gives you a genuine estimate using the same mechanics — income, declared expenses, existing commitments, and a buffered assessment rate — that real lenders use. It's not a substitute for an actual application, but it's a much more realistic starting point than a simple income multiple.
Try the borrowing power calculator