Before you book inspections or start bidding, it pays to know one number: how much a lender will actually let you borrow. Your borrowing power sets your price range, the suburbs you can look in and how much deposit you need. This guide explains how Australian lenders calculate it in 2026 and what you can do to improve it.

Want a quick estimate first? Try our borrowing power calculator. It takes about a minute and nothing you enter is stored.

How lenders work out your borrowing power

Every lender runs its own serviceability calculation, but they all ask the same question: after tax, living costs and existing debts, is there enough money left each month to repay the new loan, even if interest rates rise?

The main inputs are:

• Your income. Base salary is counted in full. Overtime, bonuses, commissions and rental income are often shaded, meaning the lender only counts a percentage of them. Self-employed borrowers usually need two years of tax returns.
• Your living expenses. Lenders compare what you declare against a benchmark (usually the Household Expenditure Measure) and use whichever is higher.
• Your existing debts. Car loans, personal loans, HECS-HELP and buy now, pay later accounts all reduce what you can borrow.
• Credit card limits. Lenders count the limit, not the balance. A $20,000 limit you never use can still cost you tens of thousands in borrowing power.
• Dependants. Each child increases the expense benchmark a lender applies.

The 3% serviceability buffer

APRA, the banking regulator, expects lenders to test whether you could still afford repayments if your interest rate were at least 3 percentage points higher than the rate you are offered. If your loan is quoted at 6%, the lender checks affordability at 9% or more.

This buffer is the biggest reason borrowing power estimates feel lower than people expect. It protects you if rates rise, but it also means a small change in your rate has a large effect on how much you can borrow.

The new debt-to-income limit

From 1 February 2026, APRA limited banks to writing no more than 20% of new home loans at a debt-to-income ratio (DTI) of six times or more. Your DTI is your total debt, including the new loan, divided by your gross annual income.

For most buyers this is not a hard cap on them personally. It limits how many high-DTI loans each bank can write. In practice, if your DTI is above 6, some lenders will be more selective or say no, while others still have room. This is where comparing lenders through a broker makes a real difference.

A worked example

Take a couple earning $95,000 and $70,000 before tax, with no children, a car loan of $450 a month and one credit card with an $8,000 limit. Using typical assumptions, many lenders would assess them somewhere in the range of $750,000 to $850,000. Remove the car loan and cancel the credit card and the same couple could borrow noticeably more.

These figures are illustrative only. Each lender treats income, expenses and debts differently, which is why the same household can get very different answers from different banks.

Seven ways to increase your borrowing power

1. Cancel or reduce credit card limits you do not need before you apply.
2. Pay off small debts such as personal loans or buy now, pay later accounts.
3. Review your spending for three months before applying. Lenders look at your bank statements.
4. Choose a longer loan term. A 30-year term lowers the assessed repayment.
5. Apply with someone else. A partner, friend or family member adds a second income. Co-buying is where Propple started.
6. Pick the right lender. Some lenders count more of your bonus, overtime or rental income than others.
7. Use a guarantor or government scheme to reduce the deposit you need, so more of your savings stay in your pocket.

Borrowing power is not the same as what you should borrow

Just because a lender approves an amount does not mean you have to use all of it. Think about what repayments you are comfortable with if rates rise, if one income stops for a while or if your family grows. Our repayment calculator helps you test different scenarios.

Get a real number

Online calculators give a starting point. A broker can check your situation against the actual policies of more than 50 lenders and tell you who will lend the most for your circumstances. Explore our home loan options or book a free call with a Propple broker.

This article is general information only and does not take into account your objectives, financial situation or needs. Government schemes, tax rules and lender policies change, so check current details before acting. Propple Pty Ltd is an Australian Credit Representative (537767) of AFSL 384704.