Lenders don't just look at what you earn. They assess whether you could comfortably keep up repayments, even if rates rise or life gets more expensive. This is called serviceability.

1. Your income.

Base salary is the simplest to assess. Overtime, bonuses, commissions and allowances may be partly counted, depending on the lender and how consistent they've been. Rental income is usually “shaded”, with lenders often counting around 70–80% of it to allow for vacancies and costs. Self-employed income is generally assessed from your recent tax returns and financials.

2. Your living expenses.

Lenders compare the living expenses you declare against a benchmark, often the Household Expenditure Measure (HEM), and use whichever is higher. They'll also review your bank statements, so it pays to know where your money goes before you apply.

3. The serviceability buffer.

Lenders test your repayments at a higher “assessment rate”, typically your actual rate plus a buffer of about 3 percentage points. So on a 6% loan, they check you could afford repayments at around 9%. This buffer is the single biggest reason borrowing power feels lower than people expect.

4. Your existing debts, including credit card limits.

Car loans, personal loans, buy-now-pay-later accounts and HECS-HELP debts all reduce what you can borrow. Credit cards count against you based on the limit, not the balance, often at around 3–3.8% of the limit per month. A $20,000 limit you never use could reduce your borrowing power by tens of thousands of dollars.

5. Debt-to-income ratio.

Lenders also look at your total debt compared with your gross income. Lending at a high debt-to-income ratio, often around six times income or more, faces extra scrutiny, and some lenders cap it.

Every lender is different. Lenders' policies on income, expenses and buffers vary, which is why the same application can produce very different results. Matching you to the right lender is a big part of what we do.

How to boost your borrowing power.

  • Reduce or cancel credit cards you don't need
  • Pay down or consolidate personal and car loans
  • Trim discretionary spending in the months before you apply
  • Make sure all eligible income is documented and counted
  • Consider a longer loan term or a co-borrower, where appropriate

For a quick estimate, try our borrowing power calculator. For an accurate number based on real lender policies, talk to us.

This article is general information only and does not consider your objectives, financial situation or needs. Lender policies change regularly. Seek personalised advice before acting.