Updated July 2026
Ask three banks how much you can borrow and you may get three answers spread across $100,000 or more. That's not sloppiness — it's the result of a serviceability calculation with several moving parts, each treated slightly differently by each lender. This guide unpacks the actual maths: the APRA buffer, the HEM expense benchmark, how HECS and credit cards quietly eat capacity, and what a single applicant can indicatively borrow at common income levels in 2026.
Every borrowing power calculation follows the same skeleton. A lender starts with your gross income, subtracts tax, subtracts living expenses (the higher of what you declare or the Household Expenditure Measure benchmark for someone in your situation), subtracts repayments on your existing debts, and then asks a single question: how large a loan could the leftover surplus service — not at today's rate, but at a stress-tested assessment rate?
Written out, it looks like this:
Two things follow immediately. First, income matters, but the surplus matters more — a high earner with a car loan, a big credit card limit and above-benchmark spending can be outborrowed by a modest earner with a clean file. Second, because the whole calculation is stress-tested, cuts to the RBA cash rate flow through to capacity, and rises squeeze it, even for borrowers who could comfortably pay at actual rates.
The RBA held the cash rate at 4.35% on 16 June 2026, with the next decision due 11 August 2026. Typical owner-occupier variable rates are running above 6%. Under APRA's rules, lenders must assess new loans at the product rate plus a buffer of at least 3 percentage points — so most applications in 2026 are being tested at assessment rates north of 9%. For a deeper look at the buffer itself, see our APRA serviceability buffer explainer.
Suppose you want a $500,000 loan at an actual variable rate of 6.10% over 30 years. Your real repayment would be about $3,030 a month. But the bank doesn't test you at 6.10% — it tests you at 9.10%. At that rate the same loan costs roughly $4,060 a month. Your surplus has to cover the higher figure. That extra ~$1,030 a month of phantom repayment is the buffer doing its job, and it's the single biggest reason quoted borrowing power feels lower than your own budget suggests.
The table below is a computed illustration, not a quote. Assumptions: single applicant, no dependants, no debts of any kind, living expenses at HEM-benchmark levels, 30-year term, assessed at approximately 9.25% (a ~6.25% variable rate plus the 3% buffer), and 2025–26 resident tax scales including Medicare levy. Every figure carries a "~" deliberately — real lenders will land above or below depending on their expense floors, income shading and policy niches.
| Gross income | Approx. net income (monthly) | Indicative borrowing power |
|---|---|---|
| $80,000 | ~$5,600 | ~$420,000 |
| $100,000 | ~$6,400 | ~$510,000 |
| $120,000 | ~$7,600 | ~$630,000 |
| $150,000 | ~$9,200 | ~$810,000 |
Notice the pattern: capacity grows faster than income. Doubling gross pay from $80k roughly doubles borrowing power because HEM expenses rise only modestly with income, so nearly every extra after-tax dollar becomes servicing surplus. To model your own numbers, including partner income, dependants and debts, run the borrowing power calculator.
Estimate Your Borrowing Power →Student debt doesn't behave like a normal loan — there's no interest in the commercial sense and no fixed repayment schedule — but banks still count it, because compulsory repayments come straight out of your pay. Lenders deduct the repayment percentage from your income before calculating your surplus. On a $100,000 salary, the compulsory repayment strips out roughly $400 a month of servicing capacity, which translates to something in the order of $50,000 less borrowing power. The counterintuitive part: the size of your remaining HELP balance barely matters to the calculation; what matters is the repayment rate your income triggers. That's why paying out a small residual balance just before applying can be one of the highest-leverage moves available.
A card you never touch still costs you. Because you could max the limit tomorrow, lenders assess an assumed commitment of about 3.8% of the total limit every month. A $10,000 limit therefore books ~$380 of monthly "repayments" against you — roughly $45,000 of lost capacity — even if the card has sat in a drawer since 2023. Cutting limits or cancelling cards is free, fast and fully reflected in the next assessment.
Car loans, personal loans, buy-now-pay-later accounts and existing mortgages all subtract their actual (or buffered) repayments from your surplus. As a rule of thumb at 2026 assessment rates, each $500 of monthly commitments removes roughly $60,000 of home loan capacity.
If you own (or are buying) an investment property, lenders won't credit the full rent. Most count around 80% of it, shading for vacancies, agent fees, maintenance and rates. Some go lower for high-density postcodes. So $500 a week of rent typically enters the calculation as about $400 — worth having, but less powerful than the gross figure suggests.
For a step-by-step action plan, read how to increase your borrowing power in 2026.
Serviceability answers "how big a loan?" — it says nothing about your deposit. Your maximum purchase price is closer to: borrowing power + deposit − stamp duty − legal and lending costs. Loan-to-value ratio (LVR) limits run in parallel: with a 10% deposit most lenders cap the loan at 90% of the property value and charge LMI, no matter how strong your income is. A borrower with $810,000 of theoretical capacity but $60,000 saved cannot buy an $850,000 home. Check the transaction-cost side with the stamp duty calculator before setting a price ceiling.
Treat any borrowing power figure — from this page, a calculator, or a bank — as a ceiling, not a target. Borrowing to the absolute maximum leaves no room for a rate rise, a job change or a new dependant, and the buffer only protects you against the first of those. A sensible workflow for 2026: estimate capacity, subtract a personal safety margin of 10–15%, confirm your deposit covers the LVR and transaction costs, and only then set a search price. Serviceability tells you what a lender will approve; your own budget should decide what you actually sign for.
Indicatively ~$500,000–$520,000 with no debts, HEM-level expenses and a 30-year term assessed near 9.25%. Real offers vary widely between lenders.
The buffer is set by APRA, not the RBA, and stays at 3 percentage points regardless of the cash rate. Rate cuts still help, because a lower actual rate means a lower assessment rate (rate + 3%).
Yes — the limit, not the balance, is assessed, at roughly 3.8% of the limit per month. Cancelling before applying is one of the few instant fixes.
Only if the payment clears the whole balance, so the compulsory repayment vanishes. Partially paying it down usually changes nothing, because your repayment rate is set by income, not balance.
They use different expense floors, income shading rules and liability treatments on top of the common 3% buffer. Comparing two or three lenders (or using a broker) is normal practice.
A pre-approval is one lender's conditional confirmation of a specific amount for a limited period, usually 90 days. Your underlying borrowing power can be higher elsewhere or change if rates, income or debts move.
General information only — this article does not consider your objectives, financial situation or needs and is not credit or financial advice. Figures are illustrative estimates that will differ from actual lender assessments. Consider seeking advice from a licensed professional before acting.