Your borrowing power is not one fixed number — it is the result of a calculation each lender runs slightly differently, and the answer can vary by tens of thousands of dollars between them on identical income. A lender starts with the income it is willing to count, subtracts your living expenses and every existing commitment, then stress-tests what is left against a repayment higher than the one you would actually make. Five things move that result more than anything else: how your income is treated, the debts and limits already in your name, your household size and declared expenses, the assessment settings applied to the loan, and your deposit and the policy niche you fall into.
1. Your income — and how much of it actually counts
Very few people have their gross income counted in full. Lenders “shade” income they consider less reliable, and the shading rules are where two assessments of the same payslip start to separate.
- PAYG base salary is normally counted in full once you are past probation, supported by recent payslips and often a year-to-date figure.
- Overtime, bonuses, commission and shift allowances are usually counted at a reduced percentage, and commonly need a two-year history to be counted at all. Some lenders are more generous with overtime in essential-services roles than others.
- Casual and contract income typically needs a minimum period in the role, and is often averaged rather than annualised from your best recent fortnight.
- Self-employed income is generally assessed on the last two years of tax returns and financial statements, often averaged, sometimes with the lower year weighted more heavily. Certain add-backs — depreciation, one-off expenses, additional superannuation, interest on debts being refinanced — can often be added back to the assessable figure, and missing them is one of the most common reasons a self-employed applicant is told they can borrow less than they really can.
- Rental income is nearly always shaded to allow for vacancy and costs, and negative gearing benefits are treated conservatively or not at all.
- Government payments, child support and maintenance are accepted by some lenders and ignored by others, and acceptance often depends on how long the payments will continue.
Because the shading percentages differ, the order of questions matters: not “how much can I borrow”, but “how much can I borrow with income shaped like mine”.
2. The debts and credit limits already in your name
Existing commitments reduce your capacity far more sharply than most people expect, and limits matter more than balances.
A credit card is normally assessed on its limit, not what you owe, using a set monthly percentage of that limit as a notional repayment. An unused card with a large limit can quietly remove a meaningful amount of borrowing capacity. The same logic applies to overdrafts and lines of credit. Personal loans, car loans and novated leases are assessed on their actual repayments, buy-now-pay-later facilities are increasingly treated as ongoing commitments, and HECS-HELP repayments reduce net income for as long as the balance remains.
If you are keeping other property, the mortgage on it must appear as both a liability and an asset. Leaving a property off the asset side while the loan sits on the liability side distorts the whole picture and is a frequent cause of a surprisingly low result.
3. Your household: dependants and living expenses
Lenders compare the living expenses you declare against a household expenditure benchmark set by postcode, income and family size, and they assess on the higher of the two. Declaring unrealistically low expenses does not help — the benchmark floor usually applies anyway, and an obvious mismatch against your bank statements invites questions.
Dependants have a direct and sizeable effect. Each child raises the benchmark, and childcare, private school fees and shared-care arrangements are counted as real costs. The number of applicants matters too: two incomes on one loan usually lift capacity well beyond the increase in the benchmark, which is why a single applicant and a couple with the same combined income often see very different numbers.
It is worth spending an evening on your actual expenses before an application. Honest, itemised figures that match your statements are faster to verify and hold up under review, and they frequently come in below a crudely estimated total.
4. The assessment settings applied to the loan itself
Your capacity is never tested against the repayment you would really make. Lenders add a buffer on top of the assessed rate to check you could still cope if repayments rose, and they apply that buffer to your existing debts as well. This is the single biggest reason the number feels conservative.
Two structural choices then move it further. Loan term matters because a longer term produces a lower assessed repayment — a thirty-year term generally tests better than a twenty-year one, even if you intend to pay it off sooner. Repayment type matters because interest-only periods are usually assessed on the principal-and-interest repayment over the remaining term after that period ends, which can reduce capacity rather than increase it. Interest-only has legitimate uses, particularly for investors, but it is rarely the way to stretch a borrowing limit.
5. Your deposit, the LVR and the policy niche you sit in
Deposit size does not change your servicing calculation, but it changes which loans you can reach and at what cost. Above an 80 per cent loan-to-value ratio, lenders mortgage insurance normally applies, and that premium is commonly capitalised onto the loan — which means a larger loan to service. Below 80 per cent, more products and pricing tiers open up.
There are also structured paths that change the maths entirely: a family guarantee using a relative’s property as additional security, and government schemes such as the Home Guarantee Scheme arrangements that allow eligible buyers to purchase with a 5 per cent deposit (2 per cent for eligible single parents) without paying lenders mortgage insurance. Eligibility caps, property price limits and place availability apply and change, so these need confirming at the time you apply.
Finally, policy niche. Some lenders treat trust structures, recently self-employed applicants, non-resident or visa-holder income, casual work or existing HECS debt far more favourably than others. Where the mainstream calculation falls short, there is normally a path — it is usually a matter of matching your situation to the lender whose written policy already accommodates it.
Lifting the number before you apply
The practical levers, in rough order of impact: close or reduce credit card and overdraft limits you are not using, and get written confirmation of the closure. Pay out or consolidate small high-repayment debts, particularly personal and car loans near the end of their term. Avoid taking on new commitments or applying for new credit in the months before an application, because each enquiry is recorded. Tidy your everyday spending for three months so your statements support the expenses you declare. If you are self-employed, get your latest returns lodged — an extra completed financial year often changes the assessment materially. And if you are buying with a partner, check the result both jointly and individually, because the stronger structure is not always the obvious one.
If you would like your own numbers run properly — across several lender calculators rather than one generic estimate — you are welcome to book a free, no-obligation consultation at https://booking.easyloanfinance.com.au. Bring your payslips or last two tax returns, a list of your current debts and limits, and a realistic picture of your monthly spending, and we can usually give you a clear range in a single conversation.
Work out your own number now: our free borrowing power & repayment calculator shows roughly how much you could borrow and what the repayments would be — worked out the way a lender assesses it, no sign-up.
General information only, not credit advice, and not an offer of finance or a promise of loan approval. Rules and costs change and vary by state — confirm current requirements for your situation. Ryan Vu is a Credit Representative (CRN 568863) of Beagle Finance Pty Ltd, Australian Credit Licence 383640.
