How Much Can I Borrow for a Home Loan?
Your borrowing capacity depends on your income, expenses, debts, deposit size, and the lender's serviceability assessment, usually ranging from 4 to 6 times your gross income.
How much can I borrow?
Your home loan borrowing capacity is primarily determined by your net income, living expenses, existing debt commitments, and the size of your deposit. Under Australian Prudential Regulation Authority (APRA) guidelines, lenders assess your ability to repay a loan at an interest rate typically 3.0% higher than the actual product rate. This serviceability buffer ensures you can handle potential rate increases, which generally caps maximum borrowing at roughly four to six times your gross household income.
Beyond income, your deposit dictates your Loan-to-Value Ratio (LVR). Most mainstream Australian lenders cap borrowing at 80% to 95% of the property’s valuation. If your deposit is under 20%, you will likely incur Lenders Mortgage Insurance (LMI), which protects the lender and can either be paid upfront or capitalised directly into the loan balance.
Every bank and non-bank lender uses different serviceability algorithms and living expense benchmarks, such as the Household Expenditure Measure (HEM). Personal loans, HECS-HELP debts, and credit card limits—even unused ones—reduce your overall capacity. Self-employed borrowers operating with an ABN may also face unique assessment criteria compared to standard full-time PAYG applicants.
Because lending policies and credit assessment criteria vary widely across Australia, speaking with a Lonix broker can help you compare suitable lenders and structure your loan application to safely maximise your borrowing power.
Related questions
- How do credit card limits affect my home loan borrowing power?
- Lenders assess credit cards based on their total approved limit rather than the active balance, applying a hypothetical monthly repayment that directly reduces your calculated borrowing capacity.
- What is the APRA serviceability buffer?
- The Australian Prudential Regulation Authority requires authorised lenders to test your capability to make repayments at interest rates 3 percentage points above the actual rate offered.
- How much borrowing power do I lose with a HECS-HELP debt?
- HECS-HELP debts reduce your net take-home pay through mandatory tax withholdings, which lowers the monthly surplus income available for home loan repayments.
- Can I borrow more if I pay off existing debts first?
- Yes, clearing personal loans, car finance, or closing unused credit card accounts reduces your ongoing monthly liabilities, immediately improving your overall serviceability profile.