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BorrowingCalculator

How Much Can I Borrow for a Home Loan in Australia?

Quick Answer:

Most Australians can borrow between 4-7 times their annual income, depending on expenses, debts, and current interest rates. Use our free calculator below for a personalised estimate.

Calculate My Borrowing Power

“How much can I borrow?” is one of the first questions every Australian home buyer asks. The answer depends on several factors that lenders use to assess your borrowing capacity. Understanding these factors can help you prepare better and potentially increase how much you can borrow.

What Determines Your Borrowing Power?

Australian lenders look at four main areas when deciding how much to lend you:

1. Your Income

Your gross annual income is the starting point. This includes your base salary, regular overtime, bonuses, commissions, and any investment income. If you're applying with a partner, your combined income is used. Self-employed borrowers typically need to provide two years of tax returns, and lenders may use an average or the lower of the two years.

2. Your Expenses

Lenders examine your living expenses carefully. They use the higher of your declared expenses or the Household Expenditure Measure (HEM) benchmark. This includes everything from groceries and utilities to insurance and subscriptions. Reducing your expenses before applying can help increase your borrowing power.

3. Your Existing Debts

Any existing financial commitments reduce your borrowing capacity. This includes credit card limits (not just balances – lenders use the full limit), personal loans, car loans, buy-now-pay-later accounts, and HECS/HELP debt. Closing unused credit cards before applying is one of the simplest ways to boost your borrowing power.

4. Interest Rates & Serviceability

Lenders don't assess you at the actual interest rate. They add a serviceability buffer (currently around 3% at most major banks) to ensure you can handle rate increases. This means at a 6.2% rate, you're actually assessed at 9.2%. When rates are higher, this significantly reduces borrowing power compared to lower rate environments.

How to Increase Your Borrowing Power

If your initial estimate is lower than expected, there are practical steps you can take:

  • Cancel unused credit cards and reduce limits
  • Pay down personal loans and buy-now-pay-later balances
  • Reduce discretionary spending for 3-6 months before applying
  • Consider applying with a partner or co-borrower
  • Choose a longer loan term (30 years vs 25 years)
  • Shop around – different lenders have different criteria

Why Our Calculator Is Different

Most bank calculators give you a single number. Our borrowing power calculator provides a range (conservative to optimistic) because different lenders will assess your application differently. We also include a rate-rise stress test so you can see how future rate changes might affect your position. All assumptions are transparent and adjustable.

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Speak to an Expert

While our calculator provides a solid estimate, nothing replaces professional advice. A mortgage broker can assess your full situation, compare hundreds of lenders, and find the best deal for your circumstances. Best of all, broker services are typically free for the borrower.

Book a free 15-minute call with a Northmark Finance broker to discuss your options.

Frequently Asked Questions

How do banks calculate how much I can borrow?

Banks assess your borrowing power by looking at your gross income, living expenses, existing debts, and credit history. They apply a serviceability buffer (usually 3% above the actual rate) to ensure you can still make repayments if interest rates rise. Each lender has slightly different criteria, which is why borrowing power varies between banks.

Can I borrow 6 times my salary in Australia?

The old rule of thumb was 5-6 times your salary, but this varies significantly based on your expenses, debts, and current interest rates. In a higher rate environment, the multiple may be lower. Our calculator gives you a more personalised estimate based on your actual financial situation.

Does HECS/HELP affect my borrowing power?

Yes. HECS/HELP debt reduces your borrowing power because lenders include the repayment as a financial commitment. The repayment is calculated as a percentage of your income once you earn above the threshold. Even though it does not appear on your credit report, you must declare it to lenders.

How much deposit do I need to buy a house in Australia?

Ideally 20% to avoid Lenders Mortgage Insurance (LMI). However, many lenders will approve loans with as little as 5-10% deposit. First home buyers may also access government schemes that allow lower deposits. A larger deposit increases your purchasing power and reduces your loan costs.

What is the serviceability buffer and why does it matter?

The serviceability buffer is an additional interest rate (currently 3% at most lenders) added to the actual loan rate when assessing whether you can afford the repayments. This means if the actual rate is 6%, the bank tests you at 9%. This buffer exists to protect borrowers against future rate increases.