How much can I borrow? A worked guide with real numbers

Most borrowing calculators give you a single number and no working. That makes it hard to know what moves the number, or why two lenders can give you answers $80,000 apart.

Underneath, almost every Australian lender runs the same kind of test, called a serviceability assessment. Once you see the structure, you can estimate your own borrowing power and, more usefully, see which levers make the biggest difference.

The test in one sentence

A lender works out how much income you have left each month after tax, living costs and existing debts, then asks how large a loan that surplus could repay at a rate about 3 percentage points higher than the loan's actual rate.

That higher rate is the serviceability buffer. APRA, the banking regulator, sets the minimum buffer, which is 3 percentage points at the time of writing. It exists so you can still make repayments if rates rise.

Step 1: Income the lender will count

Lenders start with gross income and convert it to net (after-tax) income using the tax rates. They don't count every dollar equally:

• Base salary is usually counted in full.
• Overtime, bonuses and commissions are often discounted, commonly to 80% or less, and may need a two-year history.
• Rental income is usually shaded to around 75–80% to allow for vacancy and costs.
• Allowances, casual, contract and self-employed income each have their own rules. These vary a lot between lenders, which is one reason borrowing power differs between them.

Worked example: a single applicant on a $120,000 base salary, no other income. Using 2026–27 resident tax rates and the 2% Medicare levy, net income is about $91,080 a year, or $7,590 a month.

Step 2: Living expenses

Lenders compare the expenses you declare with a benchmark for your household size and income, and use whichever is higher. The most common benchmark is the Household Expenditure Measure (HEM). They will also check your bank statements.

Worked example: assessed living expenses of $3,200 a month.

Step 3: Existing debts, assessed the lender's way

Existing debts are counted at what they could cost you, not what you currently pay:

• Credit cards are assessed on the limit, not the balance. A typical assessment is around 3–3.8% of the limit per month, even if you pay the card off in full.
• Car and personal loans are counted at their actual repayment.
• HECS-HELP repayments reduce net income.
• Buy now, pay later accounts are increasingly counted as debts.

Worked example: a $10,000 credit card limit (assessed at about $380 a month) and a car loan of $550 a month.

Step 4: The monthly surplus

Step 5: Turn the surplus into a loan size

Now the lender asks how big a 30-year principal and interest loan $3,460 a month would repay at the assessment rate. With an illustrative loan rate of 6.0%, the assessment rate is 9.0%.

The answer is about $430,000.

At the actual 6.0% rate, the repayment on that loan would be about $2,580 a month. The gap between $2,580 and $3,460 is the buffer working as intended: the lender has confirmed you could still pay if your rate rose by 3 percentage points.

What actually moves the number

This is where the structure becomes useful. Under these assumptions, every extra $100 of monthly surplus adds roughly $12,400 of borrowing power. That makes it easy to rank the levers:

Two points stand out:

1. Unused credit card limits are expensive. Cancelling or reducing a limit you don't use is often the cheapest way to increase borrowing power.
2. Small debts matter more than they look. A $550 car repayment costs you far more in borrowing power than the remaining balance on the car loan.

Another limit: debt-to-income

Lenders also look at debt-to-income (DTI): your total debt divided by your gross income. In the example, $430,000 on $120,000 income is a DTI of about 3.6. APRA limits how much of a bank's new lending can go to borrowers with a DTI of 6 or more, so very high-DTI applications face more scrutiny and fewer lenders.

Why lenders still give different answers

The structure is the same, but the inputs differ:

• how each lender counts overtime, allowances, contract and self-employed income
• which expense benchmark they use, and how they scale it
• the credit card assessment percentage
• their own buffers or minimum assessment rates
• their policy on DTI, loan-to-value ratio and property type

That's why a single online calculator rarely gives you the full picture. The lever ranking above holds regardless of the lender.

Check your own numbers

1. Work out your monthly net income, counting only the income a lender would accept.
2. Use the higher of your actual spending and a realistic benchmark.
3. Add every debt and every credit limit, assessed as above.
4. Use the repayment calculator with the rate set 3 points above today's rates to see what your surplus supports.

The free checklist below lists the documents lenders ask for, so you can get your paperwork in order before you apply.