Current at September 2026. Serviceability buffers and lender policies change; we recalculate your capacity across the panel before you rely on a number.
The short version
Your borrowing power is not one number. It is a different number at every lender, because each one counts your income, your expenses and your debts slightly differently and applies its own rules on top. The online calculators use the friendliest assumptions. This guide explains what actually drives the figure, so you know which levers you can pull.
What determines your borrowing power?
Four things: the income a lender will count, the expenses it applies as a floor, your existing debts measured at their credit limit rather than their balance, and the serviceability buffer added on top of the rate. Change any one of them and the number moves.
1. Income, and how much of it counts
Base salary counts at 100%. Overtime, bonuses, commission and allowances are usually counted at 80%, and only if they are regular over one or two years. Rental income is counted at 70% to 90%. Self-employed income is taken from tax returns with the rules described in our self-employed guide. Casual income needs six to twelve months of history.
2. Expenses, and the floor lenders apply
Lenders compare your declared living expenses with a benchmark (the Household Expenditure Measure) for your income and household size, and use whichever is higher. Three months of bank statements are read line by line. Gym, subscriptions, food delivery and buy-now-pay-later all count; a month of restraint before applying makes a visible difference.
3. Existing debts, at their limit not their balance
A credit card is assessed as if fully drawn, at about 3.8% of the limit per month. A $20,000 limit you never use reduces your capacity by roughly $50,000 of loan. HECS/HELP repayments come out of income. Car loans and personal loans count at their actual repayment. Cancelling or reducing unused limits is the fastest capacity gain there is.
4. The serviceability buffer
APRA requires lenders to test that you can afford the loan at 3 percentage points above the actual rate. At a 6% rate you are assessed at 9%. This buffer is why capacity fell so sharply in 2022 and 2023, and why a small rate cut lifts it noticeably.
Why does borrowing power differ between lenders?
Because each lender writes its own credit policy. Overtime, bonuses, rental income and casual work are all shaded differently, expense floors vary, and buffers are set above the regulatory minimum by some and at it by others. The same file can differ by a hundred thousand dollars or more.
Each lender sets its own treatment of overtime, rental yield, HECS, expense floors and debt limits. On the same application we regularly see a spread of $80,000 to $150,000 between the most and least generous lender on the panel. Choosing the right lender is often worth more than negotiating the rate.
How do you increase your borrowing power?
Cut or cancel credit card limits, clear small debts, keep three clean months of spending before applying, stretch the loan term, add a second income to the application, and apply after a pay rise appears in payslips. Most of these take weeks, not months.
- Cancel unused credit cards or cut limits to what you actually use
- Clear small personal loans and buy-now-pay-later balances
- Tidy spending for three months before the application
- Consider a longer loan term (30 years, not 25)
- Apply jointly if a partner has income, or use a guarantor for the deposit side
- Time the application after a pay rise or bonus has shown up in payslips
What borrowing power is not
It is not what you should borrow. The buffer protects the lender; your own comfort test is the repayment at 2% above today’s rate, with money left for a holiday and a car service. We will always tell you the maximum, and then tell you what we think is sensible.
Where Lend Dreams fits
We run your numbers through the panel’s serviceability calculators, not a website widget, and show you the spread. That is the real borrowing-power figure. Book a 15-minute chat and bring a recent payslip and your bank statements; we can usually give you a range on the call.
Sources: APRA on the serviceability buffer; Moneysmart on borrowing capacity.
Common questions
Why do lenders give different borrowing power figures?
Each lender counts income differently, applies its own expense floor, treats existing debts at their credit limit rather than their balance, and adds a serviceability buffer on top of the rate. Run the same numbers through two calculators and the gap can run into six figures.
What is the serviceability buffer?
Lenders assess your repayments at a rate above the one you would actually pay, so the loan still works if rates rise. APRA sets a minimum and some lenders sit above it. It is the main reason your borrowing power is lower than a rate calculator suggests.
How can I increase my borrowing power?
Cancel unused credit cards or cut their limits, clear small personal loans and buy-now-pay-later balances, tidy your spending for three months before applying, consider a longer loan term, apply jointly if a partner has income, and time the application after a pay rise shows up in payslips.
Want this checked against your own numbers?
A free 15-minute chat with a local Lend Dreams broker. No obligation, no jargon, and we tell you if the answer is “not yet”.