Your borrowing power is the most a lender will approve for a home loan, based on what is left of your income after tax, living costs and existing debts. It is a ceiling set by the lender's rules, not a figure you have to borrow up to. At Spotto Finance we compare 30+ lenders for Melbourne buyers, and the same household can get quite different answers from different banks.
This guide shows how lenders work the number out, what pulls it down and what you can change before you apply.
What Is Borrowing Power and Why Does It Matter?
Borrowing power is the maximum loan a lender believes you can repay, tested against a higher interest rate than the one you will actually pay. It sets your property budget before you inspect a single home.
- It decides which price range you can search in, so borrowing power for home loan buyers is the first number to know.
- It changes from lender to lender, because each has its own policy.
- It moves when your income, debts, expenses or interest rates move.
Many people search whats my borrowing power on the same day they start looking at listings. A better first step is to understand the inputs, because the inputs are what you can improve.
How Do Lenders Calculate Your Borrowing Power?
Lenders follow the same basic path, even though the details differ. They work out what you can safely repay each month, then size a loan around that amount.
- Start with your gross income and subtract tax to find take-home pay.
- Subtract your living costs and existing repayments.
- Test the remaining surplus against a higher assessment rate.
- Convert the repayment the surplus can carry into a total loan amount.
The Australian Prudential Regulation Authority (APRA) says its mortgage serviceability buffer stays at 3 per cent, as set out in its DTI limit information paper. In practice, lenders assess you at a rate at least 3 percentage points above the loan's actual rate, so you are approved only if you could still cope with much higher repayments.
If you want to calculate borrowing power yourself, remember that any figure you get is an estimate until a lender assesses your documents.
Which Factors Affect How Much You Can Borrow?
Several inputs sit behind every result. Some matter more than others, but all of them are visible to the lender.
- Income: Base pay counts in full. Overtime, bonuses, rental income and casual pay are often shaded down or need a history.
- Living expenses: Lenders review your real spending, not only the figure you declare.
- Debts and credit limits: Cards, car loans, personal loans and buy now pay later accounts all reduce capacity.
- Dependants: Children and other dependants raise the living costs a lender assumes.
- Loan term and rate: A longer term lowers the monthly repayment, while a higher rate lifts it.
- Deposit: A larger deposit lowers the loan you need and can widen the choice of lenders.
| Factor | Effect on borrowing power | What you can do |
|---|---|---|
| Income | Higher stable income raises it | Keep payslips and tax returns current |
| Living expenses | Higher spending lowers it | Trim regular spending before applying |
| Credit card limits | Higher limits lower it | Close or reduce unused cards |
| Dependants | More dependants lower it | Plan around them in the budget |
| Deposit | Bigger deposit helps | Keep savings visible for months |
Why Do Credit Card Limits Reduce Borrowing Power?
Lenders look at the card limit, not the balance, because you could spend up to the limit at any time. A card you never use can still count against you.
- A higher limit is assessed as a bigger monthly commitment.
- Several cards add up, even when each balance is zero.
- Cancelling an unused card can lift your result.
Before applying, list every card, buy now pay later account and personal loan. Ask for unused limits to be lowered or closed, ideally a few weeks before the lender checks your credit file.
How Does the Debt-to-Income Limit Affect Borrowing?
Debt-to-income (DTI) compares your total debts with your gross annual income. As an illustration only, someone earning $120,000 with total debts of $720,000 has a DTI of 6.
- Divide your total debts, including the new loan, by your gross income.
- A DTI of six or more is treated as higher risk.
- Lenders may still lend at that level, within their own policy.
APRA's DTI lending limit took effect in February 2026. It allows up to 20 per cent of a bank's new mortgage lending to be at a DTI of six or more, and it applies to owner-occupier and investor lending separately. APRA says the limit is unlikely to restrict owner-occupiers or first home buyers in the near term, because they usually have lower DTIs. Investors with several existing loans are more likely to feel it.
How Can You Check Your Borrowing Power Online?
An online tool gives a fast first estimate. Use it to set a rough range, then confirm the figure with a broker.
- Our own borrowing power calculator shows a result in seconds with no sign-up.
- A borrowing capacity calculator from a bank usually reflects only that bank's policy.
- A quick borrowing power calc can miss details such as HECS-HELP debt or irregular income.
Treat every online number as a starting point. A broker checks your documents against several lenders, which is the only way to see a realistic range.
Do Different Lenders Give Different Borrowing Power Results?
Yes. Two banks can look at the same payslips and return different numbers, because each sets its own rules.
- Lenders shade bonuses, overtime and rental income differently.
- Living-expense benchmarks and the way debts are counted vary.
- Some lenders are more flexible with self-employed income or non-standard employment.
This is the main reason people use a broker. Our home loan brokers in Melbourne compare 30+ lenders against your actual situation and keep the lenders that fit you, not just the biggest names.
What Does Borrowing Power Look Like for First Home Buyers?
First home buyers often have a smaller deposit and a shorter savings history, so the way a lender views savings becomes important.
- Show regular, genuine savings over several months.
- Reduce credit limits and clear small debts first.
- Ask a broker about the grants and concessions that may apply in Victoria.
Our first home buyer loan broker page explains how we help buyers line up a loan with the schemes available to them.
How Can You Improve Your Borrowing Power Before You Apply?
Most improvements are simple but take a few weeks to show up. The earlier you start, the more time lenders have to see the change.
- Pay down or close credit cards and small personal loans.
- Cut regular spending that shows up on your statements.
- Keep a clean repayment record on every account.
- Avoid new debts, including buy now pay later, before applying.
- Consider a longer loan term, or apply with a partner whose income counts.
- Talk to a broker about lenders that suit your income type.
Our how we help page outlines the steps from first enquiry to settlement.
What Should You Do With Your Borrowing Power Mortgage Result?
Your borrowing power mortgage figure is the lender's limit, not your comfort level. Plan your budget around repayments you can sustain if rates rise or life changes, rather than the maximum on offer.
- Keep a buffer for rate rises, repairs and everyday costs.
- Remember stamp duty, legal costs and other upfront costs.
- Choose a loan you could repay on one income if you are applying as a couple.
Is It Better to Look at Mortgage Borrowing Power or Repayments?
Both matter, but repayments tell you how the loan will feel month to month. A strong mortgage borrowing power result only tells you what a lender will allow.
- Check the repayment at today's rate and at a higher rate.
- Compare it with your current rent and savings.
- Decide your own limit before the lender decides it for you.
This article provides general information only and is not financial advice. Lending criteria and borrowing power vary by lender and personal circumstances, and policy settings can change. APRA figures were checked against its published information on 20 October 2026. Consult a qualified financial adviser or mortgage broker before making lending decisions. Spotto Finance holds an Australian Credit Licence (CRN 564353).
Frequently asked questions
What is borrowing power?
Borrowing power is the maximum amount a lender will approve for your home loan. It is based on your income, living expenses, debts and the interest rate the lender uses to test your repayments. Each lender sets its own policy, so the figure can differ between banks.
How do I calculate my borrowing power?
Start with your take-home income, subtract living costs and existing repayments, then see what surplus is left. A lender tests that surplus against a higher assessment rate to size the loan. An online calculator gives a rough estimate, and a broker can confirm a realistic range using your documents.
Does my credit card limit affect borrowing power?
Yes. Lenders usually assess the credit limit rather than the balance, because you could spend up to the limit. Reducing or closing cards you do not use can lift your borrowing power.
What is the serviceability buffer?
The serviceability buffer is the extra margin lenders add to the loan rate when testing whether you can afford repayments. APRA states that its mortgage serviceability buffer remains at 3 per cent, so lenders assess you at a rate at least 3 percentage points above the actual rate.
What is the debt-to-income limit?
Debt-to-income compares your total debts with your gross annual income. APRA's limit, effective from February 2026, lets banks write up to 20 per cent of new mortgage lending at a debt-to-income ratio of six or more. APRA says it is unlikely to restrict owner-occupiers or first home buyers in the near term.
Do different lenders give different borrowing power results?
Yes. Lenders treat bonuses, overtime, rental income and living expenses differently, so the same application can produce different results. A broker compares several lenders so you can see where your income is assessed most favourably.
How can I increase my borrowing power?
Reduce or close credit cards, pay down small debts, trim regular spending, avoid new debt and keep a clean repayment record. Applying with a partner or choosing a longer loan term can also change the result. Start a few weeks before you apply so the changes show on your statements.
Should I borrow the maximum amount I am offered?
Not necessarily. The maximum is the lender's limit, not a guide to what is comfortable. Plan repayments you can sustain if rates rise, and keep a buffer for upfront costs and everyday expenses.