How lenders work out your borrowing power
Every bank runs a "serviceability" test. In simple terms, it takes your after-tax income, subtracts your living expenses and existing debt repayments, and checks whether what's left could cover the new loan at a higher, tested interest rate. The largest loan that passes is your borrowing power.
- Income: your salary after tax and the Medicare levy (we use the 2026–27 rates). Lenders often count only part of bonuses, overtime and rental income.
- Living expenses: the higher of what you declare and a benchmark like the Household Expenditure Measure.
- Existing debts: car and personal loans at their repayments, credit cards at about 3.8% of the limit, and compulsory HELP repayments.
- Assessment rate: your interest rate plus at least 3%.
The 3% serviceability buffer
APRA, the banking regulator, expects lenders to assess new loans at least 3 percentage points above the actual rate. It reviewed the buffer in 2026 and kept it at 3%. So if you're offered 6%, the bank checks you could afford repayments at 9%. That's why your borrowing power is lower than the repayment alone would suggest.
Example: a single person on $100,000 with no debts takes home about $6,457 a month. After $2,100 of living expenses, $4,357 is left. At the 9% test rate over 30 years, that supports a loan of about $541,000. At the real 6% rate, the repayment on that loan is about $3,244 a month.
Estimated borrowing power by income
| Salary | Single, no kids | Monthly repayment | Couple (second earns 80%), 1 child |
|---|---|---|---|
| $60,000 | $260,000 | $1,559 | $494,000 |
| $70,000 | $330,000 | $1,979 | $619,000 |
| $80,000 | $400,000 | $2,398 | $744,000 |
| $90,000 | $471,000 | $2,824 | $871,000 |
| $100,000 | $541,000 | $3,244 | $997,000 |
| $120,000 | $682,000 | $4,089 | $1,251,000 |
| $150,000 | $882,000 | $5,288 | $1,620,000 |
| $200,000 | $1,190,000 | $7,135 | $2,192,000 |
6% rate tested at 9%, 30-year term, no other debts, no HELP, minimum living expenses. Estimates only.
APRA's debt-to-income limit
Since February 2026, banks can only write 20% of their new owner-occupier lending, and 20% of new investor lending, to borrowers whose total debt is 6 times their gross income or more. Our calculator shows your ratio and warns you when a loan goes over 6×. Above that level you may still get approved, but there are fewer lenders and less room.
Ways to increase your borrowing power
- Close credit cards you don't use, or lower their limits.
- Pay off car loans, personal loans and buy now pay later accounts.
- Keep your spending steady for three to six months before you apply, as lenders read your bank statements.
- Choose a longer loan term, which lowers the tested repayment.
- Apply with a partner, or look at the 5% Deposit Scheme so a smaller deposit works.
Next steps
Once you know your budget, add the upfront costs. Check stamp duty in your state, see whether you'll pay lenders mortgage insurance, and test repayments with the mortgage calculator.
Common questions
How much can I borrow on a $100,000 salary?
As a single person with no children or other debts, our estimate is about $541,000 at a 6% interest rate over 30 years. Lenders test your repayments at 9%, which is your rate plus APRA's 3% buffer. Each lender's policy is different, so offers can vary by tens of thousands of dollars.
What is the serviceability buffer?
APRA expects banks to check that you could still afford repayments if your interest rate rose by 3 percentage points. On a 6% loan, lenders test your budget at 9%. APRA has kept the buffer at 3% and confirmed it again in May 2026.
What is APRA's debt-to-income limit?
From February 2026, banks can make only 20% of their new lending to borrowers whose total debt is 6 or more times their gross income. Owner-occupier and investor loans are counted separately. It isn't a hard ban, but loans above 6 times income can be harder to get.
Do credit cards reduce my borrowing power?
Yes, even if you pay them off in full. Lenders count about 3% to 3.8% of each card's limit as a monthly expense. A $10,000 limit can cut your borrowing power by around $47,000, so closing unused cards or lowering limits before applying can help.
Does a HECS debt reduce how much I can borrow?
Yes. Compulsory HELP repayments come out of your pay, so lenders treat them like any other expense. On a $100,000 salary, a HELP debt reduces our estimate by about $47,000.
What living expenses do lenders use?
Lenders compare the expenses you declare with a benchmark, usually the Household Expenditure Measure (HEM), and use whichever is higher. The benchmark depends on your income, location and family size. Our calculator uses a simple minimum of $2,100 a month for a single and $3,100 for a couple, plus $650 per child.
Is borrowing the maximum a good idea?
Not always. Your maximum is what a lender will approve, not what's comfortable. Check the repayment against your real budget, and leave room for rate rises, children, or a drop in income.
This is a general estimate, not a loan offer or credit assessment. Each lender uses its own income rules, expense benchmarks and assessment rates. Sources: APRA on the serviceability buffer and debt-to-income limits; ATO 2026–27 tax rates.