If you have been searching for a property and asking yourself “can I borrow enough to actually buy this?”, you are not alone. Borrowing capacity is the single biggest financial hurdle most buyers face, and understanding exactly how lenders calculate it can be the difference between securing your dream home and missing out. This guide breaks down every key factor lenders assess and gives you actionable strategies to strengthen your position before you apply.

What Do Lenders Actually Look at When Assessing How Much You Can Borrow?

Australian lenders use a detailed serviceability assessment to determine your borrowing capacity. It is not simply a matter of multiplying your salary by a fixed number. According to the Australian Prudential Regulation Authority (APRA), lenders must apply a minimum serviceability buffer of 3 percentage points above the loan’s interest rate when stress-testing your ability to repay. As of 2024, with many standard variable rates sitting between 6% and 7%, that means lenders are effectively testing your repayments at 9% to 10%.

The main factors assessed include:

• Gross income: Salary, rental income, dividends, business income and government payments (some accepted at a discounted rate).
• Existing debts: Credit card limits (not just balances), personal loans, car finance, HECS/HELP debt and existing mortgages.
• Living expenses: Lenders use either your declared expenses or the Household Expenditure Measure (HEM) benchmark, whichever is higher. The HEM varies by location and family size.
• Employment type: Permanent employees are assessed more favourably than casual workers or the self-employed, who typically need two years of tax returns.
• Loan term and type: A 30-year principal and interest loan will yield a higher borrowing figure than a 25-year loan or an interest-only product.
• Deposit size and Loan-to-Value Ratio (LVR): Borrowing above 80% LVR typically triggers Lenders Mortgage Insurance (LMI) and can reduce the pool of willing lenders.

For a personalised starting point, try the Borrowing Power Calculator to get an indicative figure based on your own income and expenses.

How Much Can the Average Australian Borrower Actually Get?

CoreLogic and RBA data from late 2024 illustrates the challenge buyers face. The median Melbourne dwelling price sits at approximately $780,000, yet the average borrowing capacity for a single income earner on the national median wage of roughly $98,000 (ABS, November 2024) is estimated at between $420,000 and $500,000 depending on liabilities. That gap is why dual-income households and strategic debt reduction have become so important.

For a household with a combined income of $180,000 and modest debts, borrowing capacity can climb toward $850,000 to $950,000. Every additional $10,000 of annual income typically adds around $40,000 to $50,000 to what you can borrow, while every $10,000 of credit card limit reduces capacity by roughly $35,000 to $50,000, regardless of whether you carry a balance.

Understanding this interplay is covered in depth in our guide on how to calculate what you can actually borrow, which walks through worked examples for both single and dual-income buyers.

What Are the Most Effective Ways to Maximise Your Borrowing Capacity?

The good news is that borrowing capacity is not fixed. There are several proven levers you can pull before lodging a formal application.

1. Reduce or Close Unused Credit Facilities

As noted above, lenders assess the limit of credit cards, not just the outstanding balance. Cancelling a $15,000 credit card you rarely use can increase your borrowing capacity by up to $60,000. The same logic applies to buy-now-pay-later accounts, which many lenders now treat as formal credit facilities.

2. Pay Down Consumer Debt Before Applying

Personal loans and car finance carry monthly repayments that reduce your net surplus income. Paying off a $12,000 personal loan with a $350 monthly repayment could add $60,000 to $80,000 to your borrowing ceiling, because that $350 per month is no longer eating into your serviceability buffer.

3. Stabilise Your Income Profile

Lenders favour consistency. If you are self-employed, two consecutive years of strong tax returns demonstrating stable or growing income will significantly improve your assessment. Casual employees who move to permanent roles before applying can also see meaningful gains. Overtime, bonuses and rental income are typically accepted at 80% of their face value by most lenders.

4. Grow Your Deposit

A larger deposit reduces your LVR and can unlock lenders who offer higher multiples of income at sub-80% LVR. First Home Buyer schemes such as the First Home Guarantee (FHBG) allow eligible buyers to purchase with as little as a 5% deposit without paying LMI, which preserves savings that can instead service a slightly larger loan.

5. Compare Lenders Actively

Different lenders apply different shading rates to income types and different HEM benchmarks for living expenses. According to research by financial comparison platforms, the variance between the most and least generous major lender for a given borrower profile can be as wide as $100,000 to $150,000. A mortgage broker who can access multiple lenders simultaneously is valuable here.

Does Your Borrowing Capacity Change Depending on the Property Type or Location?

Yes, significantly. Lenders apply what are known as postcode restrictions and property type restrictions that can cap the LVR they are willing to offer regardless of your income. Properties in small regional towns, high-density apartment buildings (particularly those under 50 square metres internally), company title properties and rural land with large acreage often attract lower maximum LVRs of 60% to 70%, effectively requiring a larger deposit from you even if your income would theoretically support a bigger loan.

In Melbourne’s inner suburbs, where Collings Real Estate operates, standard residential properties are generally unrestricted, but off-the-plan apartments in some postcode clusters have attracted more cautious lending since the apartment oversupply of the late 2010s. Always confirm lending appetite for a specific property before making an offer, particularly at auction where contracts are unconditional.

For buyers thinking about how much is enough for a specific suburb, our detailed breakdown on how much you can afford to buy a house provides suburb-level context alongside the borrowing fundamentals.

What Role Does Your Credit Score Play in Borrowing Enough?

Your credit score influences both your access to lenders and the interest rate you are offered, which in turn affects your serviceability. According to Equifax, approximately 21% of Australians have a credit score below 620, which is classified as “below average” and can trigger higher rates or outright declines from prime lenders. Key events that damage your score include:

• Missed or late repayments on any credit product.
• Multiple hard credit enquiries in a short period (each application leaves a footprint).
• Defaults, judgements or bankruptcies (remain on your file for 5 to 7 years).
• High credit utilisation ratios (using more than 30% of available limits consistently).

The positive side: comprehensive credit reporting (CCR), introduced in Australia from 2018, means that consistent on-time repayments are also recorded and can rebuild a bruised score within 12 to 24 months. Checking your score for free through Equifax, Experian or illion before applying allows you to identify and dispute any errors before they affect your application.

Should You Consider Borrowing Through a Super Fund (SMSF)?

For investors looking beyond standard home loan structures, borrowing through a Self-Managed Super Fund is a legitimate strategy that operates under a separate set of rules and borrowing limits. SMSF lending is assessed differently from personal lending, with lenders typically requiring the fund to demonstrate sufficient liquidity and rental coverage. This is a more complex pathway and carries strict compliance obligations. If this is on your radar, it is worth reading about how to buy property through your super fund before speaking with a specialist SMSF adviser.

What Steps Should You Take Before Making an Offer on a Property?

Walking into a property search without a clear borrowing figure is one of the most common and costly mistakes buyers make. Here is a practical checklist to get your finances auction-ready:

1. Get a formal pre-approval from your preferred lender or through a broker. Pre-approvals are typically valid for 90 days and give you a documented ceiling to work within.
2. Calculate your usable deposit including genuine savings, equity from another property, gifted funds (accepted by most lenders with a statutory declaration) and any government grant entitlements.
3. Account for purchase costs on top of your deposit: stamp duty (varies by state, buyer type and property value), conveyancing fees, building and pest inspections, and loan establishment fees.
4. Stress-test your repayments at a rate 2% to 3% higher than your approved rate to ensure you can service the loan if rates rise.
5. Speak to a mortgage broker who can run your scenario across multiple lenders simultaneously without triggering multiple hard credit enquiries.

Borrowing capacity is a moving target shaped by interest rates, lender policy changes, your personal financial position and broader economic conditions. The buyers who succeed are those who take the time to understand the levers, clean up their finances and approach lenders from a position of preparation rather than hope. Whether you are a first-time buyer testing your limits or an investor building a portfolio, the fundamentals remain the same: reduce liabilities, stabilise income, grow your deposit and compare lenders before you commit.