How Much Can I Borrow? A Complete Guide to Australian Borrowing Power in 2026
Understand how Australian lenders calculate your borrowing power in 2026 — including APRA buffers, HEM benchmarks, income types, and practical tips to increase your home loan capacity.
Borrowing power is the maximum amount an Australian lender will approve for your home loan based on your income, expenses, existing debts, and the current interest rate plus mandatory buffers. In 2026, with the RBA cash rate at 3.85%, most borrowers can expect to borrow between 5× and 7× their gross annual income — but the exact figure depends on your individual circumstances.
How Lenders Calculate Your Borrowing Power
Every Australian bank and non-bank lender follows a similar framework when assessing how much you can borrow. The calculation involves four key inputs:
1. Gross Income
Lenders assess your total pre-tax income from all sources. The more stable and verifiable the income, the more weight it carries:
| Income Type | Typical Assessment Rate | Notes |
|---|---|---|
| PAYG salary (full-time) | 100% | Most favourable — payslips + tax return |
| PAYG salary (casual) | 80% | Requires 6–12 months history with same employer |
| Overtime & bonuses | 80% | Usually averaged over 2 years |
| Rental income | 80% | Based on lease agreement or valuer estimate |
| Self-employed income | Average of 2 years | Last 2 years' tax returns + financials |
| Government payments | 100% | Centrelink, child support (must be ongoing) |
| Investment income | 80% | Dividends, trust distributions |
2. Living Expenses
Lenders use the higher of your declared living expenses or the Household Expenditure Measure (HEM) benchmark. HEM is calculated based on your household composition and income bracket. In 2026, a single person with no dependants has a HEM floor of approximately $1,600–$1,900 per month, while a couple with two children sits around $3,200–$3,800.
3. Existing Debts
All existing debts reduce your borrowing capacity:
- Credit cards: Assessed at 3% of the total limit (not just the balance) per month — even if the card carries a zero balance
- Personal loans: Full monthly repayment
- HECS-HELP: Calculated based on your income above the threshold (2026 threshold: $54,435)
- Car loans / afterpay: Full monthly commitment
- Existing home loans: Full monthly repayment on the outstanding balance
Tip: Closing unused credit cards before applying can increase your borrowing power by $10,000–$30,000 depending on the card limit.
4. APRA Serviceability Buffer
The Australian Prudential Regulation Authority (APRA) requires all lenders to assess your ability to repay at the higher of the loan's actual interest rate plus a 3% buffer, or a minimum floor rate (typically 5.5%). With current variable rates around 6.0–6.5%, lenders are testing your repayments at approximately 9.0–9.5%.
This buffer is the single biggest factor limiting borrowing power in 2026. It means you must demonstrate you can afford repayments roughly 50% higher than your actual monthly commitment.
Borrowing Power Estimates by Income (2026)
These are approximate ranges for a single applicant with no dependants, no existing debts, and standard living expenses:
| Gross Annual Income | Estimated Borrowing Power | Monthly Repayment (est.) |
|---|---|---|
| $70,000 | $350,000 – $420,000 | $2,300 – $2,750 |
| $90,000 | $470,000 – $560,000 | $3,100 – $3,700 |
| $120,000 | $650,000 – $780,000 | $4,300 – $5,100 |
| $150,000 | $830,000 – $1,000,000 | $5,500 – $6,600 |
| $200,000 | $1,100,000 – $1,350,000 | $7,300 – $8,900 |
Estimates based on a 30-year principal & interest loan at 6.2% variable rate. Actual results vary by lender, expenses, and credit history.
How to Increase Your Borrowing Power
Reduce Existing Debts
Close unused credit cards and pay down personal loans before applying. Every $10,000 in credit card limits reduces borrowing power by approximately $30,000.
Lower Declared Expenses
Review your spending for 3–6 months before applying. Lenders examine bank statements for regular commitments like subscriptions, gambling, and buy-now-pay-later services.
Extend the Loan Term
A 30-year term gives you higher borrowing power than a 25-year term because monthly repayments are lower at assessment.
Add a Co-Borrower
A partner or family member's income combined with yours significantly increases capacity — but both parties' debts are also included.
Consider a Different Lender
Different lenders assess income types differently. Some are more generous with overtime, rental income, or self-employed income. A mortgage broker can identify which lenders suit your situation.
Use an Interest-Only Period
Some lenders assess on interest-only repayments for the first 5 years, which can temporarily boost capacity — but this strategy has trade-offs.
What Reduces Your Borrowing Power
- HECS-HELP debt: Reduces take-home income above the repayment threshold
- Dependants: Each child reduces capacity by approximately $50,000–$80,000
- High living expenses: Declared expenses above HEM benchmarks reduce capacity dollar-for-dollar
- Buy-now-pay-later: Afterpay, Zip, and similar services are assessed as ongoing commitments
- Recent job changes: Less than 6 months in a new role may trigger additional scrutiny
Frequently Asked Questions
How is borrowing power different from pre-approval?
Borrowing power is an estimate of how much you could borrow. Pre-approval is a conditional commitment from a specific lender after reviewing your documents. Pre-approval gives you more certainty when making offers on property.
Does checking my borrowing power affect my credit score?
Using an online calculator like CREDIGO's does not affect your credit score at all. A formal pre-approval application with a lender will appear as a credit enquiry.
Can I borrow more if I have a larger deposit?
A larger deposit does not increase your borrowing power (which is based on repayment ability), but it reduces the Loan-to-Value Ratio (LVR) — which means you may avoid Lenders Mortgage Insurance (LMI) and access better interest rates.
How often should I recalculate my borrowing power?
Recalculate whenever your financial situation changes — salary increase, debt paid off, new dependant — or when the RBA changes the cash rate.
This article is general information only and does not constitute financial advice. CREDIGO is a digital marketplace operated by EMERGUS CAPITAL PTY LTD (ABN 65 669 945 000). We do not hold an ACL or AFSL. Consult a licensed mortgage broker for advice specific to your situation.
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