“How much can I borrow?” is the right first question — but the answer depends on more than your salary and deposit. Australian lenders use detailed serviceability rules that can shrink your borrowing power in ways that aren’t obvious. Below are the most common “gotchas” plus simple ways to fix them. Try changes as you read using our Borrowing Power calculator and Repayment Estimator.
1) Credit limits, not balances
Lenders assess your credit cards and overdrafts by the limit, not the actual balance. A $10,000 limit can be treated as an ongoing monthly commitment, reducing serviceability even if you clear it every month.
Fix it: Lower unused limits (or close dormant cards) before applying. Reducing a $10k limit to $2k can materially lift borrowing capacity.
2) HELP/HECS and BNPL commitments
Study loans (HELP/HECS) and Buy Now Pay Later lines are counted as ongoing expenses. BNPL in particular can signal higher ongoing commitments and reduce the surplus the lender sees.
Fix it: Pay down or pause BNPL before you apply; ensure your payslips show consistent HELP repayments so the lender uses the right figure.
3) Serviceability buffer
Lenders test whether you can still afford repayments after a rate rise (often a ~3% buffer applied to your rate). This conservative test can significantly reduce borrowing power when rates are already high.
Fix it: Model +1% to +3% scenarios to set realistic expectations. If rate risk worries you, consider part-fixing or building a bigger cash buffer.
4) Dependants & HEM (living-expense benchmarks)
More dependants and higher declared living costs increase the minimum expenses used in the calculation. Lenders also compare your declared spending to HEM benchmarks and take the higher number.
Fix it: Tighten discretionary spending 3–6 months before applying; be accurate and consistent in declarations.
5) Car loans, personal loans & other debt
Even small residual balances can meaningfully reduce capacity because they’re assessed over your remaining term at the lender’s assumed rate.
Fix it: Pay out small loans and consolidate legacy debts where appropriate. Consider postponing new car purchases until after settlement.
6) Income type & consistency
Irregular income (overtime, commission, bonus, casual hours) is often shaded or averaged over time — sometimes only 60–80% may count. Short employment tenures can be assessed conservatively.
Fix it: Provide 6–12 months of consistent evidence for variable income. If changing jobs, keep probation periods in mind.
7) DTI caps & lender policy differences
Some lenders apply Debt-to-Income (DTI) caps (e.g., 6× income). Policies also differ by customer type (first home buyer, investor, interest-only) which can change the outcome between lenders.
Fix it: If you’re hitting a DTI ceiling, increase deposit, reduce other debts, or compare lenders with more flexible policy for your profile.
8) Property type & postcode risk
High-density apartments, very small floor areas, or “risk-graded” postcodes may attract lower acceptable LVRs or tighter assessment.
Fix it: Check any property restrictions early. If needed, adjust deposit or consider alternate properties to maximise approval odds.
Quick wins to increase your borrowing power
- Reduce unused credit limits (fastest lever).
- Clear small personal/car loans and tidy BNPL.
- Stabilise variable income evidence (consistent payslips).
- Trim discretionary spending 3–6 months pre-application.
- Consider a bigger deposit or different loan structure (e.g., part-fixed).
Try scenarios now
Open the Borrowing Power calculator in a new tab and test “what-ifs”: lower a card limit, toggle an extra loan, or bump the rate buffer. Then use the Repayment Estimator to see the monthly impact in dollars.
Tip: This week we’re adding a “Share/Save your estimate” button so you can copy a link with your inputs pre-filled — and a one-page PDF download with the BorrowPower logo for easy reference.