A lender works out your borrowing power by looking at what comes in, what goes out, and whether the loan would still be affordable at a higher rate. Each lender sets its own living expense figures and debt rules, inside the limits APRA sets for banks and other APRA-regulated lenders. A calculator gives you a starting estimate, and only a lender’s assessment gives you a firm answer.
Current as at November 2026.
Most people ask this before they’ve picked a property, and that’s the right time to ask it, even though the answer is less of a single number than it sounds. Each part of your situation gets tested separately, and the sums depend on which lender is doing the testing and what it decides counts. The Reserve Bank raised the cash rate target by 25 basis points to 4.85 per cent on 3 November 2026, so the sums are worth understanding now.
What income does a lender count?
Lenders start with income they can verify. For a salary, that usually means base pay shown on recent payslips. Overtime and bonuses are often counted only when there’s a record of them, and some lenders count only part of the amount.
If you’re self-employed, lenders usually want tax returns and financial statements. The rules for how they treat that income differ by lender, so it’s worth asking your broker which lenders suit your situation before you apply. Rental income is usually shaded. That means a lender counts less of the rent than you’d collect, because the allowance is there for empty months and costs. How much is lender policy, so don’t assume a figure until you’ve checked.
If two people are applying together, both incomes are assessed. A second income with a short work history may count for less than the first, and each lender makes that call for itself.
How do lenders treat living expenses?
Lenders need to know what you spend each month, and you tell them through the application. They then check that figure against a benchmark. Where your declared spending looks too low for your household, the lender can use the benchmark instead, and that’s the part to plan for. Bank and card statements from the last few months are the easiest way to show what you really spend.
ASIC’s Regulatory Guide 209 sets out its views on the responsible lending obligations, and it’s the document to read if you want the detail.
A regular cost you leave out, such as childcare or school fees, is exactly the sort of gap a lender will ask about. Our post on how living expenses affect your home loan borrowing capacity goes through the categories one at a time.
What about the debts you already have?
Existing debts reduce what you can borrow. Lenders count the repayment on each loan you have, and personal loans, car finance and buy now, pay later accounts all count.
Credit cards are the one people trip over. Some lenders assess a card on its limit rather than on what’s owed, so a card you rarely use can still cut your borrowing power. Whether that applies to you depends on the lender, and it’s a question to put to them directly.
If you close an old card, that can help. Check with your broker first, though, because the lender also looks at your credit history and the closure may show up there.
What is the serviceability buffer?
APRA confirmed on 28 May 2026 that the mortgage serviceability buffer “will remain at 3 percentage points”. It tests whether you could keep up with repayments if rates rose, and it applies to APRA-regulated lenders, on top of everything else in the assessment.
The test uses a higher rate, so the limit can come in lower than the rate on the table suggests.
What is the debt-to-income limit?
Your debt-to-income ratio is your total debt divided by your gross annual income. APRA also limits high-ratio lending by banks. Its 28 May 2026 release says banks can lend up to 20 per cent of new owner-occupied and investment loans at a debt-to-income ratio of 6 or more, and that the limit stays where it is.
That cap sits with the bank, not with you, and it applies to the bank’s lending as a whole. A bank that has used up its share of high-ratio lending may be less willing to approve a loan with a high ratio, even when the rest of the application looks strong.
Can a calculator tell me how much I can borrow?
A calculator is a sensible first step. You enter your income, expenses and debts, and it gives you an estimate. Our borrowing power calculator works this way.
Treat the result as a starting point, because calculators use simplified assumptions and each lender’s assessment will differ from them. The fastest way to find out is to have a broker run your numbers against the lenders we work with. Book a broker and we’ll start there.
How do you get a firm answer?
A pre-approval from a lender is the closest thing to a firm answer before a purchase. Conditional approval can take 1 to 5 business days, and a pre-approval lasts about 3 months. If your search runs longer than that, you’ll need to go back and check again, so timing matters. Our FAQ list covers the steps in more detail.
A pre-approval isn’t a promise of a loan. The lender still looks at the property and your circumstances at the end, and it can change its mind if something shifts.
Loan Lounge is a Burwood brokerage with 7 brokers, and we work with a panel of 75+ lenders. For most residential lending, lenders pay us commission and there’s no direct fee to you. We speak English, Vietnamese, Cantonese and Mandarin across the team, so you can talk through the numbers in the language that suits you.
Frequently asked questions: how much you can borrow
Does a borrowing power calculator give an approval?
No. It gives an estimate based on the inputs you enter. Only a lender’s assessment gives you a firm answer, and even that depends on the property you end up buying.
Why does one lender give a different answer from another?
The APRA settings apply to banks and other APRA-regulated lenders, but the rest of the assessment is lender policy. Each lender sets its own living expense figures, its own treatment of debts and its own approach to rental income, so the answers can differ quite a lot.
Does a higher cash rate reduce how much I can borrow?
It can, indirectly. Lenders test affordability at a higher rate than the one on the loan, and changes to the cash rate can flow through to the rates lenders set. Nothing here is a prediction of interest rates.
How long does a pre-approval last?
About 3 months. Check the terms in your own pre-approval letter, because they can differ by lender.
This is general information only. It doesn’t take your objectives, financial situation or needs into account and isn’t financial, tax or legal advice. Nothing here is a prediction of interest rates. If tax is involved in your plans, talk to your accountant before you commit. Loan Lounge, ACL 515608.
Ready to see where you stand? Book a broker and we’ll work through your numbers with you.
Sources
- Australian Prudential Regulation Authority, “APRA maintains current macroprudential policy settings in highly uncertain environment”, 28 May 2026. apra.gov.au/node/42931
- Reserve Bank of Australia, media release 26-30, cash rate target decision, 3 November 2026. rba.gov.au/media-releases/2026/mr-26-30.html
- Australian Securities and Investments Commission, “Credit licensing: responsible lending conduct” (Regulatory Guide 209), read 2026-11-04. asic.gov.au
- Loan Lounge, company information.