How much can I borrow for a home loan?

You’ve already inspected properties and saved up. Now, the big question is: how much can you actually borrow?

An online calculator like ours can provide you with a range—showing your borrowing capacity across multiple lenders.  That’s because there isn’t just one answer. How much you can borrow depends on your income, debts, spending, and how each lender looks at these factors.

This guide will show you how Australian lenders work out borrowing power, what you might get approved for compared to what’s actually sensible, and how you can improve your chances before you apply.

Borrowing capacity is the most a lender is willing to offer you, based on how risky they think it might be to lend to you. It’s not a personal recommendation, and it doesn’t mean the loan will be comfortable for you.

Lenders work out this number using standard information, government rules, and their own policies. That’s why two lenders might give the same person different borrowing limits.

Maximum borrowing is the most a bank thinks you could repay, given your current financial situation. They use a higher interest rate to calculate your repayment capacity, to help ensure that the mortgage isn’t burdensome even if things get slightly tougher. Sensible borrowing, on the other hand, is what you can actually afford in your day-to-day life. 

While banks use sophisticated algorithms to figure out how much you can borrow, only you know your exact spending capacity and future plans.

If you borrow the maximum, you might not have much left for surprise expenses, changes in your lifestyle, or future plans. Many people aim to keep mortgage repayments under 30% of their gross income, but this is just a guideline.

Lenders figure out how much you can borrow by checking if you can afford the repayments. The exact formula might change, but the basic idea is the same everywhere.

They start with your total income before tax, take away your living costs and any debts you already have, and then check if what’s left can cover loan repayments at a higher interest rate.

Key elements include:

• Income from all acceptable sources
• Declared and benchmark living expenses
• Existing debts and credit limits
• Interest rate buffers
• Debt-to-income and LVR limits

That’s why there isn’t one set maximum home loan amount in Australia. Your borrowing limit is personal and depends on your whole financial situation.

Interest rates play a huge role in determining borrowing capacity. When rates rise, repayments go up, which reduces the amount a lender is willing to lend. Conversely, lower rates increase borrowing power, though lenders still apply a buffer to account for potential rate rises.

Since the RBA began its series of rate hikes in 2022, the average Australian’s borrowing capacity has fallen significantly. This has been one of the biggest challenges for first home buyers in recent years.

Let's see the impact of a 1% change in the lender's assessment rate for a couple earning a combined $150,000 per year.

A 1% increase in the rate used for assessment can slash your borrowing power by nearly $75,000. This is why even small movements in interest rates can have such a big effect on the property market and your ability to buy a home.

The type of interest rate can influence borrowing capacity because lenders apply a serviceability rate when assessing your application. 

For example, if your variable rate is 5.5%, the bank may assess your loan at 8.5%. If a fixed rate is 6.0%, the assessment rate rises to around 9.0%.

Because fixed rates are often higher than variable rates, they can reduce your borrowing capacity. A higher assessment rate means the lender assumes higher repayments, even if you won’t pay that much today.

However, this doesn’t mean a variable rate loan is better than a fixed rate loan or vice versa. Different types of loans suit different borrowers, and it is important to choose one that best fits your current situation and future plan.

There is no single “maximum” home loan in Australia. Lenders calculate the maximum amount based on your financial profile, including income, expenses, debts, deposit and credit history.

Every lender in Australia uses a similar set of factors to calculate your home loan borrowing capacity, but each has its own policies. Understanding these core factors is the first step to mastering your application.

1. Your income: This is the biggest driver. Lenders look at your gross (before tax) income from all sources. This includes your salary, bonuses, overtime, commissions, and any reliable secondary income. They’ll want to see consistency, which is why they ask for recent payslips and sometimes a letter from your employer.
2. Your living expenses: Lenders used to rely heavily on a generic benchmark called the Household Expenditure Measure (HEM). Now, they conduct a much more detailed analysis of your actual spending. They will scrutinise your bank statements to see where your money goes—groceries, transport, entertainment, subscriptions, and more. Understating these expenses is a common mistake that can lead to a rejected application. Lenders check your bank statements against their own minimum spending benchmarks for your household size and income. If your stated expenses look unrealistically low, they’ll override them with their higher figure, slashing your borrowing power.
3. Your existing debts and liabilities: This is a huge one. Lenders look at all your financial commitments. This includes:
4. •  Personal loans
   •  Car loans
   •  HECS/HELP student debt
   •  Credit card limits (not just the balance, but the total limit)
   •  Buy Now, Pay Later services (like Afterpay or Zip)
   •  Any other mortgages or rent-to-own agreements
4. Your dependants: The number of people who financially rely on you affects your borrowing power. Each dependant (children or a non-working partner) adds a set amount to your living expenses in the lender's calculation, reducing the income available to service a loan.
5. Your deposit size: A larger deposit reduces the lender's risk and demonstrates your ability to save. A deposit of 20% or more of the property value means you avoid paying Lenders Mortgage Insurance (LMI), a costly premium that protects the lender, not you.
6. Your credit history: A strong credit score shows you’re a reliable borrower. Lenders will check your credit report for a history of on-time payments, defaults, or too many recent credit applications. While a minimum score of around 650 is generally preferred, some lenders may be more flexible if other parts of your application are strong.
7. The interest rate buffer: This is a crucial, government-mandated safety net. The Australian Prudential Regulation Authority (APRA) requires lenders to assess your ability to repay your loan at an interest rate that is at least 3 percentage points higher than the actual rate on your loan. While this buffer can reduce your borrowing capacity, the aim is to help ensure you can still afford repayments if rates rise.

Income is the engine of your borrowing power. More income generally means a higher borrowing capacity, but how it’s earned and who earns it makes a difference.

For Pay-As-You-Go (PAYG) employees, proving income is straightforward with payslips and a group certificate. For self-employed Australians, it's more complex. Lenders need to see evidence of stable and consistent earnings, typically requiring two full years of tax returns and business financials. Because of this perceived variability, major banks often apply a more conservative approach to self-employed income, sometimes leading to a lower borrowing capacity compared to non-bank lenders who may have more flexible assessment criteria.

Let's see how income plays out with a couple of practical examples. These are estimates only and assume no other debts and average living expenses.

Example 1: Sarah, a single applicant

•  Annual income (gross): $90,000
•  Estimated borrowing capacity: ~$450,000 - $500,000

Example 2: Tom and Chloe, a couple

•  Combined annual income (gross): $140,000 ($90k + $50k)
•  Estimated borrowing capacity: ~$700,000 - $780,000

As you can see, combining incomes significantly increases borrowing power. However, lenders still assess living expenses on a household basis, which will be higher for a couple than a single person.

Disclaimer: These figures are illustrative only and do not constitute financial advice. Your actual borrowing capacity will vary based on your full financial situation and lender criteria.

1. Start with the property price and subtract your deposit to calculate the loan amount.
2. Calculate the loan-to-value ratio (LVR) to see whether it falls within lender limits.
3. Check whether lenders mortgage insurance (LMI) applies, which is commonly required above an 80% LVR.
4. Assess affordability, including serviceability and debt-to-income (DTI) limits, based on your income, expenses and existing debts.

Example:
If you’re buying a $700,000 property and have a $140,000 deposit, you would need to borrow $560,000. This results in an 80% LVR, which may avoid LMI. However, the loan still needs to meet the lender’s serviceability and DTI requirements before approval.

Your deposit is your ticket into the property market. Its size relative to the property’s value determines your Loan-to-Value Ratio (LVR), a key metric for lenders.

LVR = (Loan Amount / Property Value) x 100

A lower LVR means less risk for the lender, which can unlock better interest rates and help you avoid LMI.

Your deposit influences your LVR, interest rates, and LMI obligations.

Example – $700,000 Property

First Home Guarantee Scheme allows eligible buyers to enter the market with as little as 5% deposit without paying LMI, with the government acting as guarantor for up to 15% of the loan.

LVR measures how much you are borrowing relative to the property value. Lower LVRs reduce lender risk and can improve interest rates.

• ≤80%: No LMI required, access to most lenders and competitive rates
• 81–90%: LMI required, higher costs
• 90%: Limited lender options, higher risk

If your LVR is above 80% (meaning your deposit is less than 20%), you’ll almost certainly need to pay LMI. This is a one-off insurance premium that protects the lender if you default on the loan. It does not protect you. LMI can add up to thousands, or even tens of thousands of dollars, and is often added on top of your loan amount, so you end up paying interest on it for the entire life of the loan.

Let’s compare deposit scenarios for a $700,000 property.

For eligible first home buyers, the Australian Government 5% Deposit Scheme can help you buy a home with a deposit as low as 5% without paying LMI. Single parents or legal guardians can purchase a house with as little as a 2% deposit. 

The government essentially acts as a guarantor for up to 15% of the loan (18% for single parents or legal guardians), bringing your LVR down to 80% in the lender’s eyes. 

DTI = Total Debt/ Gross Income

DTI (Debt-to-Income ratio) is calculated by dividing your total debt by your gross annual income. It shows how heavily your income is stretched by debt. A higher DTI — such as six or more — signals higher risk to lenders.

From 1 February 2026, APRA will introduce a system-wide lending limit on high-DTI home loans. Banks will only be allowed to approve loans with a DTI of six or more for up to 20% of their new home lending. This limit applies separately to owner-occupiers and investors.

This is not a ban. Banks can still approve high-DTI borrowers if they believe the loan is affordable, as long as they remain within the 20% allowance. The aim is to reduce overall risk in the housing and financial system.

Paying down existing debts reduces your DTI and can help improve your borrowing capacity under these rules.

Example:

Let’s look at an example.

•  Applicant: A couple with a combined gross income of $180,000.
•  Existing Debts:
• •  Car Loan: $25,000 remaining
  •  Credit Card Limits: $15,000 total
•  Desired Home Loan: $1,000,000
•  Calculation:
• •  Total Debt = $25,000 (Car) + $15,000 (Cards) + $1,000,000 (Home Loan) = $1,040,000
  •  DTI = $1,040,000 / $180,000 = 5.78

This DTI is approaching the high-risk threshold of 6. If they wanted to borrow $1.1 million, their DTI would be 6.3, putting them in the high-DTI category and making approval much more difficult. Reducing existing debts is often an effective strategy to increase borrowing capacity.

Your credit score is like a financial report card. In Australia, scores typically range from 0 to 1200. A higher score indicates a more responsible borrower.

•  Loan approval: A very low score (e.g., below 550) can be an automatic red flag for many mainstream lenders, potentially leading them to reject your application.
•  Interest rate: Lenders may offer better interest rates to applicants with excellent credit scores.
•  Lender choice: A strong score gives you access to a wider range of lenders and products. A weaker score might limit you to specialist lenders who may charge higher rates.

Lenders are legally required to ensure they don't provide you with a loan that is "unsuitable." To do this, they run your finances through a rigorous affordability or "serviceability" test. This typically involves two key components.

The serviceability buffer is APRA’s mandatory 3 percentage point margin added to your loan’s interest rate when a lender assesses affordability. For example, a loan priced at 6.2% is assessed as if the rate were 9.2%.

The buffer was introduced after earlier interest rate rises exposed risks in household borrowing and was refined in 2021. Its purpose is to ensure borrowers can cope if rates increase, while also reducing risk across the banking system.

Despite calls from parts of the industry to lower the buffer — for example, to 2.5% to lift borrowing capacity — APRA confirmed in July 2025 that the buffer would remain at 3%.

Lenders compare your declared living expenses against their own internal benchmarks (like the HEM). If your declared expenses are lower than their minimum for a household of your size and income, they will use their higher figure in the calculation. This prevents applicants from understating their spending to try and qualify for a larger loan. Lenders are also increasingly scrutinising bank statements to get a more realistic picture of discretionary spending, which can reduce borrowing capacity.

Lenders calculate the borrowing capacity of migrant workers using the same core framework as for Australian citizens, but with extra checks around visa status, income type and documentation. 

For any borrower (migrant or citizen), lenders look at:

• Income: Salary and wages (PAYG), overtime/allowances, bonuses, rental income etc., usually averaged over time.
• Living expenses: Based on your actual bank statements plus internal benchmarks (HEM) for your household size.
• Existing debts: Credit cards (limits, not just balances), personal loans, HELP/HECS, car loans, BNPL.
• Deposit & LVR: Size of your deposit and whether LMI will be payable.
• Serviceability test: They calculate whether your remaining income can afford repayments at a buffered rate (actual rate + 3%) and/or floor rate (e.g. 5.5–6%).
• Credit history: Any Australian credit file, plus sometimes overseas history if available.

Where migrants differ is in policy overlays, especially for non‑citizens or those using foreign income:

• Visa type and residency status
• • Permanent residents are often assessed almost identically to citizens.
  • Temporary residents, work visa holders and non-residents usually face:
  • • lower maximum LVR (e.g. 70–90% instead of 95%)
    • higher minimum deposit
    • tighter checks on employment stability and time in Australia
    • sometimes a smaller panel of lenders.
• Foreign currency income
  If you earn in another currency (or partly offshore), banks typically:
• • convert your income to AUD, then
  • “shade” it, only using 60–90% of the converted amount in the servicing calculation to allow for FX risk.
  • Still apply the same buffers/floor rates as for local borrowers.
• Proof of income and employment
  Migrant workers can be asked for:
• • employment contract and letter from employer
  • multiple recent payslips
  • longer employment history in the same role or industry
  • translated documents if original payslips or tax returns are not in English.
• Country / policy risk
  Some lenders will not accept income from certain countries or currencies, or will treat it more conservatively. This feeds into the “serviceable income” number, and therefore borrowing capacity.

Because of those overlays, many migrant workers will find:

• Same income, lower usable income in serviceability:
• • foreign income shaded
  • higher assumed tax
  • some allowances/bonuses excluded.
• Same income, lower maximum LVR:
• • need a bigger deposit
  • sometimes must avoid LMI or use a specific LMI provider.
• Same profile, fewer lenders:
• • you might only qualify with lenders that have migrant/expat policies, which can change how aggressively they calculate capacity.

For a migrant worker wanting to estimate capacity:

• Use a mainstream borrowing capacity calculator to get a rough range.
• Then adjust expectations if:
• • you’re on a temporary or work visa
  • you earn in a foreign currency
  • you have a short employment history in Australia.
• For an accurate figure, a lender or broker who specialises in migrant/non‑resident lending can:
• • apply the correct visa/LVR rules
  • shade your foreign income appropriately
  • run a full serviceability test across several lenders.

Buying a home as a migrant can feel complex, but it’s very achievable with the right guidance. Your borrowing capacity depends on your visa status, income, credit history and the lender’s rules, so it helps to get a clear assessment early in the process. Whether you’re unsure about HECS, fixed vs variable rates, or how your income will be assessed, a broker can help you understand your options and identify lenders who are more migrant-friendly.

If you’re ready to explore what you can borrow, book an obligation-free chat with our broker and learn more about home loans tailored to your situation.

Online calculators give you a useful starting range to understand your borrowing capacity, but they’re just a guide—different tools use varying assumptions on income, expenses, rates, and buffers. For instance, Bheja’s home loan borrowing capacity calculator shows you a realistic range to help you explore “what if” scenarios like paying down debt or boosting income.

Check with a broker or lender for a personalised quote.

Most simple online calculators don't account for:

•  The type of income you have (e.g., casual, self-employed).
•  The full impact of your credit card limits.
•  Your specific living expenses.
•  Your credit score.
•  The lender’s specific DTI and serviceability policies.

Use a calculator to get a ballpark figure. Play with the numbers to see how changing your income, debts, or dependents affects the outcome. But for a true understanding of your mortgage borrowing limits in Australia, you may need to speak with a lender or a mortgage broker who can run a detailed serviceability assessment based on your exact circumstances.

First home buyers are assessed under the same rules as other borrowers.

• Smaller deposits and limited savings history can reduce borrowing limits, even with government support schemes.
• Schemes help with entry costs, not repayment capacity.

There’s no fixed minimum income, but lenders expect:

• Stable, verifiable income
• Ability to repay with buffer
• Debts low enough to meet DTI limits

Self-employed borrowers usually need two years of consistent financial statements.

Before you apply, run through this checklist to see where you stand and what you can improve.

•  Income: Is it stable and well-documented? Have you gathered your last 3-6 months of payslips?
•  Deposit: How close are you to a 20% deposit to avoid LMI?
•  Debts: Can you pay down or consolidate any personal loans or car loans?
•  Credit Cards: Can you reduce the limits on any cards you don't use?
•  Spending: Have you reviewed your last three months of bank statements to get a realistic picture of your living expenses?
•  Credit Report: Have you checked your credit score and report for any errors?
•  Buffer: Have you calculated what your repayments would be if interest rates were 3% higher than they are today?