James HurwoodWritten by James Hurwood
Reviewed by Stephen Zeller
Last updated 10/01/2024

Key takeaways

  • Most borrowing power calculators will give you a rough estimate of your borrowing power but won’t factor in important financial considerations like LMI and government charges.
  • Our new borrowing power calculator looks at a wider range of factors and aspects of your financial situation, to give you a more accurate idea of what loan you might expect to get.
  • Understanding your true borrowing power is crucial if you want to know which properties are within your budget when house-hunting which may help to avoid disappointment.
  • Knowing your borrowing power is important when refinancing too, as it may help you work out if you can re-borrow your outstanding home loan amount in the current market.

How does borrowing power work?

Confused by the concept of borrowing power? Luckily for you, Selling Houses Australia host, Andrew Winter, is here to help explain.

New and improved calculator

Our new and improved borrowing power calculator takes a closer look at your overall financial situation and aims to provide a more informed idea of your borrowing power. A report that’s tailored especially for you makes it “Simples!” to learn more about where you stand financially.

Calculate today!

Basic snapshot calculator

After a quick snapshot? Use the basic calculator below to get a quick, rough estimate of your borrowing power.

Calculations are provided by VisionAbacus Pty Ltd ACN 140 627 765 (VisionAbacus). Whilst every care is taken to ensure the accuracy of the information as a guide for costing, no responsibility is accepted by VisionAbacus for its accuracy. Please check with a mortgage broker, accountant, financial advisor or other suitably qualified professional for an accurate estimate. Compare the Market Pty Ltd takes no responsibility for the calculations or information provided on this website by VisionAbacus nor any liability for the accuracy of or reliance upon or use of such calculations or information. Before deciding to purchase any product you should calculate the actual costs (as the calculators contain general information only and may not suit your particular circumstances) and read the relevant product terms and conditions. Calculations are not an offer of credit and don’t include any applicable fees.

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Stephen Zeller, General Manager

Expert tips for understanding borrowing power

As General Manager of Money at Compare the Market, Stephen Zeller knows how important a firm understanding of one’s borrowing power is when house-hunting and trying to take out a home loan, so he’s passionate about making sure consumers know what their borrowing power is, and how borrowing power works. With that in mind, he has some borrowing power-related tips for you:

Keep your credit limits in mind

Even though you may pay down your credit card balance each month, lenders still consider your credit card limits and may assume it can be drawn to its limit the day after the loan settles. When applying for home loan finance, we can review your circumstances based on lower or no credit limits, which can significantly boost your borrowing power.

Remember your HECS debts

Don’t forget about student HELP (HECS) debts; these will be factored in when a lender is reviewing your borrowing power, and are one of the most common liabilities that are forgotten about. If you only have a minimal amount owing, you may want to consider paying this out prior to settlement, as it could positively affect your borrowing power.

We’re here to help

There are many twists and turns when working out someone’s borrowing power, so you may want to speak with our Home Loan Specialists to help run through your circumstances in depth. Keep in mind that while it can be great finding out what your potential borrowing power is, you need to ask yourself if you would be comfortable having this amount of debt and whether you can reasonably make these repayments.

Borrowing power explained

What is home loan borrowing power?

Your borrowing power is the amount of money a lender might potentially lend you based on your unique financial situation. Borrowing power is generally calculated using your regular income and living expenses, plus a few other factors.

These tend to include, but aren’t limited to:

  • Whether you’re buying with another person, and how much they earn
  • The number of dependants you have
  • Any current outstanding debt or financial commitments (such as a credit cards, car loans or personal loans)
  • The size of any regular loan repayments you’re currently making
  • Your credit score and credit history
  • Your employment status and history
  • The interest rate and loan term you’d be looking to secure.

Borrowing power is generally a more helpful yardstick than deposit size alone for prospective homebuyers. For example, you could have a $1 million deposit saved up, but that doesn’t mean you could afford to meet the interest repayments on a multi-million-dollar home loan.

Whereas borrowing power explicitly ballparks the amount you could potentially borrow, and the property values you could potentially afford based on how much you can afford to repay.

How different factors affect home loan borrowing power

As we’ve mentioned, there are many different factors that can influence the amount of money a lender is willing to let you borrow. However, there are a few notable exceptions, including:

  • Income. Just because you earn a lot doesn’t automatically mean you’ll be able to borrow a lot. Because your borrowing power is based on your income after all your regular expenses have been accounted for, you could have a relatively high income and a bank still might not give you a new home loan if you’re not saving any of it. Conversely, you could earn a more modest income, but if you spend very little of it, your borrowing capacity could be higher than you might think.
  • Existing debt and assets. Contrary to popular belief, existing debt isn’t always the devastating blow to your home buying ability that some may think. Existing debt can sometimes strengthen your application if you have a proven track record of meeting your repayments on time, and it doesn’t chew into too much of your regular income. However, existing debts can also negatively affect your borrowing power by reducing the amount of income you have available to put towards home loan repayments.
  • Deposit amount. As your deposit doesn’t really have anything to do with your regular income and expenses, you may be surprised to know that the size of your deposit generally won’t have too much of an impact on your borrowing power – provided you’ve saved an adequately sized deposit relative to the purchase price you’ve got in mind. The size of your deposit could affect your maximum feasible purchase price, and will also have an impact on whether you have to pay lenders mortgage insurance (LMI).

What else can affect my home loan borrowing power?

Many things can affect your borrowing power, so it may be worth going over some of the lesser-known factors that could have an impact on your borrowing power. These include:

  • Desired loan purpose. Whether you’re an owner-occupier, an investor looking to refinance an existing home loan or looking to buy your next property, or a first home buyer, it’s important to know how your borrowing power might be affected by your buying circumstances. If an investment property will generate rental income, that could increase your borrowing power in the event that you decide to refinance or take out another home loan. Furthermore, the additional costs that might come with an investment home loan could also affect your borrowing power.
  • Desired loan type. It generally won’t matter if you’re swinging for a fixed ratevariable rate, construction, line of credit or split rate home loan. However, as your borrowing power will be affected by the interest rate of the loan you’re applying for, one loan type having a significantly higher rate than another could see your borrowing power decrease for the higher-interest loan and increase for the lower. Additionally, borrowers looking to make interest-only repayments will typically see their borrowing power reduced due to how lenders’ borrowing power algorithms factor in the interest-only period, in which the borrower’s loan principal sees no reduction.
  • Your choice of lender. Different lenders in Australia may have different lending criteria across their range of home loan options, so you may see your borrowing power fluctuate depending on the interest rates and calculations of different lenders. You’ll generally want to compare different lenders, comparison rates and home loan options to make sure you’re getting the best value possible.

How can I increase my home loan borrowing power?

You can generally increase your borrowing power by considering the factors that influence it and working on them individually. While some of these changes may not make an immediate difference, the impact on your borrowing power may prove greater than the sum of its parts over time.

Some steps you could take to increase your borrowing power include:

  • Reducing your living expenses. It’s been said many times over, but consider cutting down on everyday treats and unnecessary spending. While buying a coffee a day might not seem like a lot in the context of building up savings, it’s not insignificant in the context of your weekly, fortnightly or monthly repayments. If you struggle with drawing up or sticking to a budget, you may want to try using a budget planner, and if you have a credit card or two, perhaps consider reducing your credit card limits to reduce your potential spending.
  • Pay down existing debt. Whether it’s credit card debt or a car loan, the presence of existing debt can have an impact on your borrowing power because it directly reduces the amount of money you have available to put towards home loan repayments. While having debt isn’t always an immediate dealbreaker when it comes to getting a home loan, it likely won’t help you if you’re looking to increase your borrowing power. Consider paying down, consolidating or restructuring your debts before applying for a home loan.
  • Look at cheaper properties. If you can’t find a way to increase your borrowing power, why not decrease the amount of borrowing power you’ll need to buy a house by downsizing your property expectations? If you don’t have a problem with looking at smaller homes, it could be an effective way to make your borrowing power work harder in your favour.

How do interest rates affect my borrowing power?

Your interest rate will influence the overall size of your ongoing mortgage repayments, making it one of the more important variables at play when calculating your borrowing power.

However, there is a second, indirect way in which a home loan’s interest rate can affect your borrowing power, and even your overall eligibility for any given home loan.

The Australian Prudential Regulation Authority (APRA) expects lenders to factor in something called a ‘serviceability buffer’ when assessing each and every home loan application they receive. The current minimum interest rate serviceability buffer is three percentage points, which means that lenders risk breaching their compliance requirements if they approve a home loan that the applicant can’t afford to repay a rate increase of three percentage points.¹

This measure is in place to protect borrowers against significant interest rate hikes, but it can cause a lot of headaches if you’re unaware of it and trying to get approval for a home loan.

So, keep that extra 3% in mind when you’re thinking about borrowing power. A certain home loan product may seem within your means based on your desired loan amount, but what if its advertised rate was 3% higher? Our home loan comparison tool will take this buffer into account when calculating your borrowing power.

N.B.: While we can provide you with an approximate idea of how much you may be able to afford to borrow, it should only be taken as a guide rather than a formal pre-qualification, as our borrowing power calculations don’t reflect the individual and varying serviceability standards of each lender.

Stephen Zeller, General Manager

Meet our home loans expert, Stephen Zeller

Stephen has more than 30 years of experience in the financial services industry and holds a Certificate IV in Finance and Mortgage Broking. He’s also a member of both the Australian and New Zealand Institute of Insurance and Finance (ANZIIF) and the Mortgage and Finance Association of Australia (MFAA).

Stephen leads our team of Home Loan Specialists, and reviews and contributes to Compare the Market’s banking-relating content to ensure it’s as helpful and empowering as possible for our readers.


  1. APRA. APRA increases banks’ loan serviceability expectations to counter rising risks in home lending. 2023.
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