Buying property

How much can I borrow for a home loan?

The main factors Australian lenders use to calculate home-loan borrowing capacity.

Short answer

Your borrowing capacity is the maximum a lender believes you can repay under its assessment rules. It depends on income, living expenses, debts, dependants, loan term and the lender's serviceability buffer – not simply a multiple of your salary.

What changes the result

Lenders verify income and commitments, then test the proposed loan at a higher assessment rate. Credit-card limits can reduce capacity even when the balance is zero because the lender allows for the full limit being used.

Stable, acceptable income generally increases capacity.
Personal loans, HELP debt and credit limits reduce it.
Living expenses must be realistic and supportable.
Each lender applies different policy and calculations.

Maximum is not the same as affordable

A lender's maximum does not account for every personal goal or future cost. Set your own comfortable repayment limit, allow for rate rises and keep room for emergencies before deciding on a purchase price.

How the lender tests the loan

APRA-regulated banks generally apply a serviceability buffer over the loan rate and use verified income, ongoing commitments and living expenses. Existing home loans can also be assessed at buffered repayments rather than the amount currently paid. Credit cards may be assessed from the limit, not the balance. Rental, overtime, bonus or other non-salary income can be reduced before use. The result is a policy calculation designed to test stress, not a prediction of your exact household budget.

Why two calculators produce different numbers

Lenders differ in how they treat income types, dependants, living-expense benchmarks, existing debts, HELP obligations and loan terms. An online calculator also uses limited information and may not reflect the final credit assessment. A lender that shows a larger number is not automatically the best lender. Its rate, fees, property policy and evidence requirements still need to fit. Use calculators for an initial range, then obtain an assessed position before making binding commitments.

Set a personal limit

List the repayment at the proposed loan amount, then add rates, insurance, maintenance and any body corporate cost. Test a higher interest rate and consider future parental leave, school expenses, business changes or retirement. Keep enough cash for emergencies and purchase costs. If the lender's maximum leaves no room for saving or normal life, it is too high for your household even if it can technically be approved. A sustainable loan should support the property and your other goals.

Questions to ask before you proceed

Which approval conditions and property checks are still outstanding?
How much cash is required for the deposit, purchase costs and a sensible buffer?
Does the lender have restrictions on this property type, title, size or location?

Key takeaway

Use borrowing capacity as an approval ceiling, then choose a lower personal budget you can manage comfortably.

Try the home loan borrowing calculator for an initial estimate, then check the assumptions with Monet.

Official guidance: Moneysmart: Mortgage calculator

This is general information, not personal financial, tax or legal advice. Lending criteria, fees and eligibility vary.

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