Our borrowing power calculator works much like a bank’s assessment. To get started, you’ll need three key details: your income, your expenses, and your preferred loan details.
Enter all your before-tax income sources. This includes your salary, your partner’s income if applying together, rental income, dividends, or other regular earnings. Always use gross (pre-tax) figures for accuracy. Adding a co-borrower’s income can increase your combined borrowing power.
Next, provide an estimate of your household expenses and financial commitments. This covers food, utilities, transport, and the number of dependants you support. Be sure to include any loan or credit card repayments. If you don’t have exact figures, a reasonable estimate is fine. Remember: higher expenses reduce how much you can borrow.
Finally, input your preferred loan term (for example, 30 years) and the interest rate. If you’re unsure, you can start with an average market rate — many competitive loans are currently between 5% and 6% p.a. The interest rate and term directly affect your estimated monthly repayments.
Tip: Not sure what interest rate or term to enter? Every situation is different. Contact our team for personalised guidance, or check current home loan offers to see today’s rates.
Borrowing at your maximum capacity can be risky. If circumstances change, you may struggle to meet repayments. Still, if your borrowing power feels too low for the property you want, there are safe ways to improve it. Here are practical strategies to consider:
A larger deposit reduces the amount you need to borrow and lowers your loan-to-value ratio (LVR). It also shows lenders you’re disciplined with money. Even saving an extra few percent of the property price can boost your borrowing power and help you avoid paying Lenders Mortgage Insurance (LMI). If possible, wait a little longer and build your savings.
Personal loans, car loans, and credit card balances all reduce your borrowing capacity. Paying them off frees up cash that can instead go toward your mortgage. Clearing high-interest debts also improves your debt-to-income ratio, making you a lower risk in the eyes of lenders.
Lenders assume your credit cards are fully drawn to their limit. This can drastically lower your borrowing power. For example, a $10,000 limit could reduce your home loan capacity by tens of thousands. Lowering a limit from $20,000 to $5,000 — or closing unused cards altogether — can improve your serviceability. The same applies to buy-now-pay-later accounts like Afterpay.
Banks closely check your recent bank statements. High discretionary spending can reduce your assessed borrowing power. Cut back on non-essentials such as dining out, subscriptions, or big purchases in the months before applying. This lowers your living expenses and may allow the lender to approve a higher loan amount.
Not all lenders assess borrowing power the same way. Some may include overtime or bonuses, while others may use different benchmarks for living expenses. A mortgage broker can guide you to lenders more likely to approve your target amount. However, avoid applying everywhere at once. Multiple applications in a short period can harm your credit score.
A higher income directly boosts your borrowing power. This might mean asking for a raise, picking up extra hours, or exploring side income streams such as freelancing or renting out a spare room. Lenders will count stable income, but new sources may need to be shown as ongoing and sustainable. If applying with a partner, even part-time work can improve your combined borrowing capacity.
Anything that lowers your debts or increases your income will lift your borrowing power. But remember: just because you can borrow more doesn’t mean you should. Leave room in your budget for rate rises and unexpected costs. It’s better to borrow an amount you can manage comfortably than to stretch yourself to the limit.
Every borrower’s situation is unique — and our team has the expertise to handle them all. We’ll help streamline your loan journey and guide you every step of the way. Contact us today to get started.
