How much you can borrow for a home depends less on your salary than on what's left over each month, tested at a higher interest rate than you'll actually pay.
Here's how Australian lenders work it out in 2026, a worked example and what you can change to borrow more.
How lenders assess a home loan
- Income after tax. Your salary after income tax, the Medicare levy and any HELP repayment. Some lenders only count part of bonuses, overtime or rental income.
- Living costs. What you tell them, or their minimum benchmark (often the Household Expenditure Measure), whichever is higher.
- Other debts. Car and personal loan repayments, buy now pay later, and a share of every credit card limit.
- The buffer. APRA requires lenders to check you could repay at a rate at least 3 percentage points above the loan rate.
The formula
Monthly surplus = take-home pay − living costs − other repayments − 3.8% × card limitsAssessment rate = loan rate + 3%Borrowing power = surplus × (1 − (1 + r)^−n) ÷ r, at the assessment rate r per month over n monthsWorked example
Example: Single applicant, A$110,000 salary, A$2,500 a month living costs
Take-home pay: about A$7,023 a month after tax and Medicare.
Surplus: A$7,023 − A$2,500 = A$4,523 a month.
Tested at 9% (6% + 3%) over 30 years, that supports a loan of about A$562,000.
Actual repayments at 6%: about A$3,369 a month, so there's room to spare if rates rise.
Add a A$10,000 credit card limit and the lender counts A$380 a month against you, which cuts borrowing power by about A$47,000.
How to borrow more
- Close or lower credit card limits you don't use.
- Pay off small personal loans or buy now pay later balances before you apply.
- Apply with a partner, if you're buying together.
- Keep your spending steady for the three to six months of bank statements lenders review.
To see your repayments on a particular loan, use the home loan EMI calculator.
How to use this calculator
- Enter your salary, and your partner's if you're applying together.
- Add your monthly living costs and any other loan repayments.
- Enter your total credit card limits, even if you pay them off each month.
- Set the interest rate and loan term.
FAQs
Why can I borrow less than the repayments I could afford?
Lenders test your loan at your rate plus at least 3 percentage points, so the repayment they check is higher than the one you'd actually pay.
Do credit card limits reduce borrowing power?
Yes. Lenders count a share of the limit, commonly around 3.8% a month, even if the card is paid off. Closing or lowering unused limits can increase what you can borrow.
Does a HELP debt affect borrowing power?
Yes. Compulsory repayments come out of your take-home pay, so they reduce what's left for a loan.
Is this what I'll actually be offered?
No, it's an estimate. Each lender uses its own expense benchmarks, income rules and limits on high debt-to-income loans. A broker or lender can give you a pre-approval.
Sources
- APRA: Macroprudential settings, 3 percentage point serviceability buffer (May 2026)
- Moneysmart: Home loans
Results are estimates for Australian residents and aren't tax or financial advice. For your own return, check with a registered tax agent. Spotted a mistake? Tell us.