Last updated: July 2026 · Reviewed by John Pierre Saliba, Director and Mortgage Broker, MFAA Accredited
How Much Can You Borrow in 2026?
Your home loan borrowing capacity is calculated by lenders using your income, financial commitments and living expenses, run through a serviceability calculator at an assessment rate typically 3% above the actual loan rate (an APRA-mandated buffer). The result varies by lender, sometimes by $100,000–$300,000 for the same borrower and the same financials.
The most impactful thing most borrowers can do immediately: reduce credit card limits. A $20,000 credit card limit is assessed as $600/month in committed spending, regardless of whether you carry a balance. Reducing three cards from $20K to $5K each removes $900/month from your assessed commitments, adding approximately $80,000–$100,000 to your borrowing capacity. Do this 3 months before applying.
The Basic Formula
Lenders assess: monthly net income (after tax, HECS, commitments) minus monthly living expenses (HEM benchmark) minus monthly loan repayments (at the assessment rate of actual rate + 3%). The remaining surplus determines how much loan you can service.
Income Factors
- Base salary: 100% included by all lenders
- Overtime/bonus: 80–100% if 2 years consistent history
- Rental income: 70–80% included
- Child support received / FTB: 80–100% depending on lender
- Self-employed income: 2 years average from tax returns (or alt-doc)
- Commission income: 80–100% with 2-year history
Commitment Factors That Reduce Capacity
- Credit card limits: 3% of the limit per month (not the balance)
- Personal loans: Full repayment amount
- Car loans: Full repayment amount
- HECS: Compulsory repayment rate on your income
- Child support payable: Full amount deducted
- Investment property shortfalls: Net holding cost (rent minus expenses)
Borrowing Capacity Examples, 2026
- Single, $80,000 salary, no debts, no HECS: ~$450,000–$520,000
- Single, $120,000 salary, no debts, no HECS: ~$700,000–$820,000
- Couple, $160,000 combined, $20K car loan: ~$850,000–$1,000,000
- Couple, $220,000 combined, no debts: ~$1,200,000–$1,400,000
Lender Variance, The Hidden Variable
The same borrower can have borrowing capacity assessed $100,000–$300,000 differently by different lenders. Key differentiators:
- Assessment rate buffer (3.0% vs 3.5%)
- HEM living expense benchmarks (vary by lender and family size)
- Credit card assessment (2% vs 3% of limit)
- Treatment of overtime, bonus and commission income
- Rental income shading (70% vs 80%)
Steps to Maximise Your Capacity Before Applying
- Reduce credit card limits to what you genuinely need
- Pay down personal loans and car loans if 6+ months before applying
- Lodge most recent tax return
- Don't take on new credit commitments in the 3–6 months before applying
- Have your accountant document legitimate add-backs if self-employed
