Key Takeaways
Your borrowing power depends on your income, household costs, existing debts and the interest rate used in the lender’s assessment. Two lenders can calculate different amounts for the same household.
APRA-regulated banks generally test repayments at the loan rate plus a buffer of 3 percentage points. A loan at 6% may be assessed at 9%, even though the actual interest rate is lower.
Lenders may compare your spending with a household benchmark and assess credit cards against their available limits, even when you owe nothing on them.
Since 1 February 2026, limits on high debt-to-income lending have applied to banks. These restrict the share of new loans at 6 times income or more, not every individual borrower.
An online calculator might put a home you've been eyeing in Albury or Wodonga out of reach. But it's only an estimate. How much you can borrow for a home loan depends on how each lender assesses your income, spending and existing debts.
If you're buying your first home, it's worth checking those estimates with a first home loan broker before choosing a price range for your property search.
How Lenders Calculate Borrowing Power
Lenders don't just look at your salary. They work out what you could afford to repay after living costs and other commitments. This is called serviceability, and the main things they consider are:
Income: what you earn and how reliably you receive it.
Living expenses: what you spend compared with the lender’s benchmark.
Existing debts: repayments on car loans, personal loans, credit cards and study debts.
Assessment rate: the higher interest rate used to test affordability.
How Lenders Assess Your Income
Not all income is assessed in the same way. Lenders look at how consistently you receive it and what evidence you can provide:
Salary and Wages
Permanent salary may be counted in full, depending on your employment history and the lender’s policy.
Variable Income
Overtime, bonuses, commissions and allowances can change from month to month, so lenders may average them or count only part of the amount.
Rental Income
Lenders often include only part of the rent you receive to allow for property costs and periods without a tenant.
Self-Employed Income
Business owners may need tax returns and financial statements from more than one year. These are useful when comparing lenders with a self-employed mortgage broker, as each lender may assess business income differently.
How Living Expenses Affect Borrowing
Lenders look at what you actually spend, but many also check it against a benchmark. One commonly used measure is the Household Expenditure Measure (HEM), which accounts for household size and income. The Australian Prudential Regulation Authority (APRA) expects banks using HEM to consider the higher of your declared spending and a suitable benchmark.
Bank statements help lenders check whether those figures reflect your usual spending. Subscriptions, meals out and buy now, pay later commitments can all leave less room for home loan repayments.
How Debts Reduce Borrowing Power
Even a credit card you barely use can affect your borrowing estimate. Lenders look at several kinds of debt:
Credit cards: lenders may calculate repayments using the credit limit, not just the outstanding balance.
Car and personal loans: lenders include the required repayments, even when little is left owing.
Study debts: compulsory Higher Education Loan Program (HELP) repayments may reduce the income available for a home loan.
Buy now, pay later: existing facilities and repayment commitments may be considered.
Paying down debt or reducing an unused credit limit might help, although the difference it makes depends on the lender and your circumstances.
Why Lenders Add an Interest Buffer
APRA retained the minimum 3-percentage-point serviceability buffer for banks in May 2026. This extra margin tests whether you could still manage repayments if interest rates rise.
For example, a loan with a 6% interest rate may be assessed at around 9%. Some lenders also set their own minimum assessment rates.
That's why a lender's borrowing estimate may be lower than the figure on a calculator using only your actual interest rate.
How Debt-to-Income Limits Work
Your debt-to-income (DTI) ratio compares your total debts and credit limits, including the proposed new loan, with your gross annual income. For example, $900,000 in total debt against $150,000 in income gives a DTI of 6.
From 1 February 2026, APRA has limited banks to 20% of new owner-occupied lending and 20% of new investor lending at a DTI of 6 or more. Finance for newly erected homes, construction of new dwellings and eligible owner-occupier bridging loans is exempt under APRA’s debt-to-income rules.
This limit applies to each bank’s lending portfolio, not as an automatic ban on an individual borrowing 6 times their income. A lender may still apply tighter policies.
Ways to Improve Borrowing Power
Not every part of the calculation is fixed. Changes to your debts, spending or loan term may affect how much a lender is willing to offer:
Pay off small debts or close unused credit cards where appropriate.
Review ongoing expenses and keep your declared spending accurate.
Compare lenders, as income assessments and debt policies can differ.
Consider whether a longer loan term suits your situation, bearing in mind that it may increase total interest paid.
A guarantor arrangement may reduce the deposit needed or help avoid lenders mortgage insurance (LMI), but it doesn't usually increase the income a lender assesses. The risks to the family member providing security are also worth discussing with a guarantor home loan broker.
Borrowing Example in Wodonga
Hypothetical example for illustration only.
Ben and Sarah live in Wodonga with one child and earn $150,000 a year combined. They have a $30,000 car loan and two credit cards with $20,000 in combined limits, though they rarely use them.
In this example, a DTI of 6 means $900,000 in total debts and limits, including any new loan. Their $30,000 car loan and $20,000 card limits count towards that figure, but it doesn't mean they could borrow the remaining $850,000. Repayment capacity still matters, and reducing those commitments might improve their result.
Frequently Asked Questions (FAQs)
Why might lenders give me different borrowing amounts?
Lenders may count overtime and rental income differently, and not all use the same expense calculations or minimum assessment rates. Comparing their figures side by side can show why the estimates vary.
Does pre-approval show exactly what I can borrow?
Pre-approval is a more useful guide than an online calculator, but it's not final approval. It is usually conditional and may change or expire after checks on your finances and the property.
Does Having a Bigger Deposit Increase My Borrowing Power?
A bigger deposit doesn't automatically increase your borrowing power, as lenders still assess your income, expenses and existing debts. However, it can reduce the amount you need to borrow and may help you avoid lenders mortgage insurance (LMI). Your deposit and borrowing capacity both matter when working out your property budget.
Can I Borrow More With a Joint Applicant?
Applying with a partner or another person may increase your borrowing power if their income helps cover the proposed repayments. However, lenders will also assess their existing debts, living expenses and financial commitments. A joint application doesn't always mean a higher borrowing limit, so it's worth comparing the figures before deciding.
Does Changing Jobs Affect How Much I Can Borrow?
Changing jobs can affect your borrowing power, particularly if you're still on probation or have moved into casual or contract work. Some lenders may want to see a consistent employment history, while others may accept a recent job change if you're working in the same industry. Your income, employment type and the lender's policies will influence the outcome.
The Bottom Line
Before you start inspecting properties, gather your income records, review your usual living expenses and check your existing debts and credit limits. Having these details ready can help you get a more accurate borrowing estimate, compare lenders and set a realistic budget for your property search.
Loan Street Finance can compare the numbers across lenders to help you set a realistic budget for your Albury-Wodonga property search.
This article provides general information only and does not take your objectives, financial situation or needs into account. You may wish to speak with a qualified professional before acting.