How Much Can I Borrow? Understanding Borrowing Power

Your borrowing power — also called borrowing capacity — is the maximum amount a lender is willing to lend you. Understanding what affects it can help you plan better and potentially increase the amount you can borrow.

What Lenders Look At

Lenders assess several factors when calculating your borrowing power:

• Income — Your salary, rental income, bonuses, and any other regular income
• Expenses — Living costs, existing debts, credit card limits (even if unused), and other financial commitments
• Deposit — How much you've saved and where it came from
• Credit history — Your track record of repaying debts
• Employment type — Full-time, part-time, casual, or self-employed
• Loan term — Typically 25–30 years

The Serviceability Buffer

Lenders don't assess your ability to repay at the actual interest rate. They add a buffer — currently 3% above the loan rate — to ensure you can still afford repayments if rates rise. This significantly reduces how much you can borrow compared to what the repayment calculator might suggest.

Example: If the loan rate is 6%, the lender assesses your repayments at 9% to make sure you can handle rate increases.

How to Increase Your Borrowing Power

1. Reduce Your Debts

Pay off personal loans, car loans, and credit cards. Even unused credit card limits reduce your borrowing power — consider closing cards you don't need.

2. Reduce Living Expenses

Lenders look at your spending habits via bank statements. Reducing discretionary spending in the months before applying can help.

3. Increase Your Income

A pay rise, second job, or rental income can boost your borrowing power. Some lenders also consider overtime and bonuses.

4. Choose the Right Lender

Different lenders have different policies and calculators. A mortgage broker can identify which lender is likely to offer the highest borrowing power for your situation.

Why a Broker Helps

Borrowing power varies significantly between lenders. A broker knows which lenders are more generous with their assessments and can match you with the right one — potentially adding tens of thousands to your borrowing capacity.