The $150,000 Question Most People Don't Know to Ask
Here's a scenario I see every week: a couple earning $150,000 combined walks into their bank, asks "how much can we borrow?", and the bank says $620,000. They accept it, start looking at properties under $620K, and buy something that fits. What they never find out is that a different lender - one they never thought to ask - would have approved them for $700,000.
That $80,000 gap is not unusual. In fact, the difference in borrowing power between the most conservative lender and the most generous lender on our panel is routinely $100,000-$150,000 for the exact same borrower. Same income, same expenses, same deposit. Different answer.
This happens because every lender uses a different servicing calculator, different assumptions about your expenses, and different policies on how they treat various income types. Understanding how this calculation works puts you in control. Let me break it down.
How Borrowing Power Is Actually Calculated
Every lender follows the same basic formula, but the inputs they plug in vary wildly:
Borrowing Power = (Assessable Income - Living Expenses - Existing Debts) ÷ Assessment Rate Repayment
Let me unpack each component:
Assessable income
This is your income after the lender applies their own adjustments. For a PAYG employee, it's fairly straightforward - your base salary is taken at 100%. But overtime, bonuses, commission, and casual income are treated differently. Some lenders count 80% of overtime, others count 50%. Some want 2 years of bonus history, others want just 1 year. A self-employed borrower's income assessment is even more variable.
Living expenses
This is where the biggest variation happens. Lenders use either the Household Expenditure Measure (HEM) - a statistical benchmark - or your actual declared expenses, whichever is higher. HEM figures vary by household size and location. Some lenders' HEM is generous (lower), giving you more borrowing capacity. Others use a higher benchmark or insist on actual expenses, which reduces your capacity.
Existing debts
Every existing commitment - credit cards, personal loans, car loans, HECS, BNPL accounts - gets factored in as a monthly liability. The way lenders calculate these liabilities differs. Credit cards are assessed on the limit, not the balance. HECS is assessed as a percentage of income.
Assessment rate
APRA mandates a serviceability buffer of at least 3% above the loan's interest rate. So if the actual rate is 6.2%, the lender tests whether you can afford repayments at 9.2%. Some lenders also have a floor rate (minimum assessment rate) of around 5.5%. The assessment rate determines the monthly repayment figure they test against your net income.
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The Servicing Buffer: Why You Can Borrow Less Than You Think
The 3% servicing buffer is the single biggest factor limiting borrowing power in 2026. It was introduced by APRA as a prudential measure, and while it protects borrowers from rate shock, it dramatically reduces how much you can borrow.
Let me show you the impact. On a $150,000 household income with no debts:
| Assessment Method | Rate Used | Approx. Borrowing Power | Monthly Repayment at Assessment Rate |
|---|---|---|---|
| At actual rate (6.2%) | 6.20% | ~$920,000 | $5,630/mo |
| With 3% buffer | 9.20% | ~$700,000 | $5,740/mo |
| Difference | +3.00% | -$220,000 | Similar repayment, different principal |
That buffer costs this household $220,000 in borrowing capacity. There's been industry discussion about reducing the buffer to 2.5% or even 2%, but as of February 2026, APRA has maintained it at 3%. It's unlikely to change in the near term.
Income Types and How Lenders Treat Them
Not all income is created equal in a lender's eyes. Here's how different income types get assessed:
| Income Type | How Lenders Assess It | What You Need to Show |
|---|---|---|
| Base salary (PAYG) | 100% of gross income | 2 recent payslips + employment letter |
| Overtime | 50-80% (varies by lender) | 12-24 months history on payslips or group cert |
| Bonus/commission | 50-80% (averaged over 1-2 years) | 2 years of payment summaries or tax returns |
| Casual employment | 80-100% (if consistent) | 12+ months with same employer, recent payslips |
| Part-time work | 100% of contracted hours | Employment contract + payslips |
| Self-employed | Average of last 2 years' net profit (varies hugely) | 2 years' tax returns + financials |
| Rental income | 70-80% of gross rent | Rental statement or lease agreement |
| Government payments (Centrelink) | 100% (some lenders exclude) | Centrelink statement |
| Child support received | 100% (some lenders exclude) | Court order or CSA assessment |
| Second job | 50-100% (varies by lender) | 6-12 months history at second job |
Here's where the lender variation really bites. If you earn $80,000 base plus $30,000 in regular overtime, one lender might count your income as $104,000 (base + 80% of OT) while another counts it as $95,000 (base + 50% of OT). That $9,000 income difference translates to roughly $50,000-$65,000 in borrowing power. And this is just one variable.
HEM vs Actual Expenses: The Hidden Variable
The Household Expenditure Measure (HEM) is a statistical benchmark derived from ABS Household Expenditure Survey data. It represents the median spending for a household of your size and composition. Lenders use the higher of HEM or your declared actual expenses.
Here's why this matters: if your actual monthly expenses are $3,500 but HEM for your household is $2,800, the lender uses $3,500 and your borrowing power is lower. But if another lender uses a slightly different HEM calculation at $3,600, they use $3,600 regardless of your actual spend - and ironically, you might borrow more with the "stricter" lender because their servicing calculator treats other components differently.
The HEM figures for a single person currently sit around $1,600-$2,000/month (depending on the lender's version). For a couple with two children, it's $3,200-$4,200/month. These are minimum expense assumptions - if your bank statements show higher spending, the lender will use the higher figure.
What lenders look at in your bank statements
- Regular dining out and food delivery
- Subscription services (Netflix, Spotify, gym memberships)
- Gambling transactions (even small bets)
- Buy Now Pay Later usage
- School fees and childcare
- Private health insurance
- Regular online shopping habits
My advice: clean up your spending for 3 months before applying. I'm not saying live like a monk - but reducing discretionary spending brings your declared expenses closer to HEM, which maximises your borrowing power.
What Reduces Your Borrowing Power
These are the most common borrowing power killers I see:
Credit cards
A $10,000 credit card limit reduces your borrowing power by approximately $40,000-$50,000 - even if the balance is zero. The lender assumes you could draw the full limit tomorrow and calculates your repayment liability at 3% of the limit ($300/month). If you have a $20,000 card you barely use, cancelling it before applying could unlock $80,000-$100,000 in additional borrowing capacity.
HECS/HELP debt
Your HECS repayment is calculated as a percentage of your income (sliding scale from 1% to 10%). On a $100,000 income, the repayment is about $5,500/year ($458/month). This reduces borrowing power by roughly $40,000-$60,000. You can't avoid this one, but it's worth knowing the impact.
Car loans and personal loans
A $30,000 car loan with $500/month repayments reduces your borrowing power by approximately $65,000-$80,000. If possible, pay off car and personal loans before applying for a home loan. The maths almost always works in your favour.
Buy Now Pay Later
Afterpay, Zip, Humm - most lenders now treat active BNPL accounts as existing commitments. Some lenders calculate a monthly liability based on your recent BNPL usage. Close all BNPL accounts at least 3 months before applying.
Dependants
Each dependant increases the HEM living expense benchmark. One child might reduce your borrowing power by $30,000-$50,000. Two children: $60,000-$100,000. This is unavoidable, but it explains why a single person on $100K can often borrow more than a couple with kids on $150K combined.
Existing investment properties
If you already own an investment property, lenders add its expenses (interest, rates, insurance, management fees) to your liabilities and only count 70-80% of the rent as income. The net effect often reduces your borrowing power for the next purchase.
Lender-by-Lender: The Borrowing Power Gap
To illustrate just how much borrowing power varies, here's a comparison based on a common scenario: a couple earning $150,000 combined, no dependants, $5,000 credit card limit, no other debts, PAYG employed.
That's a $150,000 range for the exact same borrower. The difference comes down to three things: how each lender calculates living expenses, how they treat the servicing buffer, and how generous their income assessment is. This is the fundamental reason why asking one bank "how much can I borrow?" gives you an incomplete picture.
How to Increase Your Borrowing Power
Here are the strategies I use with my clients to maximise their borrowing capacity. Some are quick wins, others take more planning:
1. Close or reduce credit card limits. This is the single fastest way to increase borrowing power. A $15,000 credit card limit you don't use is costing you $60,000-$75,000 in borrowing capacity. Call your bank today and either cancel the card or reduce the limit to $2,000.
2. Pay off personal loans and car loans. If you have a $25,000 car loan, paying it off before applying could increase your borrowing power by $55,000-$70,000. Sometimes it makes sense to use savings for this even if it reduces your deposit slightly.
3. Cancel BNPL accounts. Close Afterpay, Zip, and any other Buy Now Pay Later service at least 3 months before your application. Even small accounts signal credit dependency to lenders.
4. Extend the loan term. A 30-year loan term gives you higher borrowing power than a 25-year term because the monthly repayments are lower. You can always make extra repayments to pay it off faster.
5. Choose the right lender. This is where a broker earns their keep. We know which lender's servicing calculator is most generous for your specific income and expense profile. The difference can be $100,000+.
6. Clean up your bank statements. Reduce discretionary spending for 3 months before applying. The less your actual expenses exceed HEM, the more you can borrow.
7. Add a co-borrower. If your partner has income - even part-time - adding them to the application increases total assessable income and usually increases borrowing power significantly (unless they also bring significant debts).
8. Consider a longer fixed rate. Some lenders assess fixed rate loans at the fixed rate plus a smaller buffer (or no buffer at all for the fixed term), which can increase borrowing power compared to a variable rate assessment.
Frequently Asked Questions
How much can I borrow on a $100,000 salary?
On a single income of $100,000 with no other debts and minimal expenses, most lenders will approve $550,000-$650,000. However, this varies dramatically by lender - I've seen the range span from $520,000 to $700,000 for the exact same borrower depending on which lender assesses the application. Factors like credit card limits, dependants, HECS debt, and living expenses all reduce this amount.
Why do different lenders offer different borrowing amounts?
Each lender uses a different servicing calculator with different assumptions about living expenses (HEM vs actual), different buffer rates, different treatment of overtime/bonus income, and different policies on existing debts. Two lenders can look at the same payslips and come back with amounts $80,000-$150,000 apart. This is the single biggest reason to use a broker - we know which lender's calculator works best for your specific income and expense profile.
Does HECS/HELP debt reduce my borrowing power?
Yes. Lenders include your HECS repayment in their servicing calculation. The repayment is based on a percentage of your income (ranging from 1% to 10% depending on your salary). On a $100,000 income, your HECS repayment is about $5,500/year, which can reduce your borrowing power by approximately $40,000-$60,000 depending on the lender.
How does a credit card affect my borrowing power?
Lenders assess your credit card limit, not your balance. Even if your $10,000 credit card has a zero balance, lenders calculate repayments as if it's fully drawn - typically 3% of the limit per month ($300/month). That $300/month liability can reduce your borrowing power by $40,000-$50,000. Reducing your credit card limit or closing unused cards before applying is one of the easiest ways to increase your borrowing capacity.
Can I increase my borrowing power?
Yes. The most effective strategies are: close or reduce credit card limits, pay off personal loans and car loans before applying, cancel Buy Now Pay Later accounts, reduce declared living expenses (within reason), apply with a lender whose servicing calculator is more generous for your profile, extend the loan term to 30 years, and consider a joint application if your partner has income. A good broker can often find $50,000-$100,000 more borrowing power than your bank offers.
What is the 3% serviceability buffer?
APRA requires all lenders to test whether you can afford repayments at a rate 3% above your actual loan rate, or a minimum floor rate (typically around 5.5%), whichever is higher. So if your rate is 6.2%, the lender tests your ability to pay at 9.2%. This buffer exists to protect borrowers from future rate rises but significantly reduces borrowing capacity compared to being assessed at the actual rate.
Your Next Step
Your borrowing power is not a fixed number - it's a range that depends on which lender you ask. And the gap between the lowest and highest offer is routinely $100,000-$150,000. If you've only asked your bank, you might be leaving significant capacity on the table.
The most effective thing you can do right now is get your borrowing power assessed across multiple lenders simultaneously. That's exactly what we do. You can book a free consultation with us - we'll compare your borrowing power across our panel of 83 lenders and show you exactly which lender gives you the best result for your specific situation. No obligation, no cost to you.
