What Can Affect Your Borrowing Power?

Get the loan amount you need to buy your dream home

Your borrowing power and borrowing capacity will depend on your income, family size, location, current debts, type of loan and the lender that you choose.

There are a number of things that you can do that will increase borrowing power.

Should you cancel your credit cards?

If you have unused credit cards, it’s best to cancel them.

Lenders take credit cards into account when they calculate how much you can borrow regardless of whether they are being used or not!

If you do have credit cards that you use, then reduce the limit. By reducing the limit on you credit card you’ll improve the amount you can borrow on your home loan.

There are some lenders that will ignore any credit cards if they have been paid off in full for three months in a row but most assume that your credit cards are fully drawn to their limit.

They do this because there is a possibility that some people will use their full credit limit in the future.

If credit card debt is impacting your borrowing capacity, speak with one of our specialist brokers today.

Call us on 1300 889 743 or fill in our free assessment form.

Consider a fixed interest rate

The majority of lenders usually add at least a 1.5% buffer on top of the standard variable interest rate.

This new rate is the rate the lenders will assess your loan against.

For example, if you want to borrow $500,000 and the current standard interest rate is 7%, a lender will add a 1.5% buffer and assess your loan repayments at 8.50%.

The buffer is what lenders use to mitigate the risk of interest rates rising.

The resulting higher assessment rate can greatly reduce your borrowing power.

What’s the solution?

By choosing a 3 year fixed interest rate, the assessment rate changes.

Unlike a variable rate, if you fix your rate for 3 years at 6.00% p.a., some lenders will assess you at the 3-year fixed rate they advertised.

In some cases, lenders may still include a buffer but it’s not as big as an assessment rate on a variable loan.

This can make a huge difference!

Our mortgage brokers are experts in fixed home loans and know which lenders don’t apply as a assessment rate.

Contact us today by completing our free assessment form or calling 1300 889 743.

Learn how we can improve your borrowing power.

Should you consolidate your debts into your mortgage?

Unsecured debts often have a higher rate of interest and can impact your borrowing capacity.

Consolidate any debt that have short repayment terms with expensive monthly repayments.

These debts can include both personal loans and credit card debt.

Unsecured debt limits the amount of uncommitted funds you have available to repay your proposed mortgage.

It also doesn’t look from the perspective of your “character” as a borrower.

If you’re refinancing your current home loan, you can roll your personal loan or other debts into your existing mortgage.

This will help your cause, as they will no longer show as other financial commitments.

This will stretch the debt over the life of your loan, attracting interest in the long run.

If you’re buying a property then you’ll need to have a large deposit to be able to consolidate your debts into your mortgage.

Do financial records affect how much you can borrow?

If you’re self employed, outdated financial evidence can be detrimental to your borrowing power.

When it comes to borrowing power, banks assess your most recent two years tax returns.

They look at your financial statements to make sure that your business is stable and the wage you pay yourself is sustainable.

By keeping good financial records you’ll also be more aware of where your money is going and what it’s doing.

This enables you to plan for the future of your business and budget for your new mortgage repayments.

If you don’t have up to date tax returns then you may qualify for a low doc home loan which has more flexible lending criteria than a standard home loan.

You may not see an outgoing company debt as a liability for tax deduction reasons but the lender may may think you’ve intentionally not disclosed information to them.

This can result in your loan being declined by the lender.

This is why more self employed people choose to go through a mortgage broker.

We can build a strong with alternative income evidence.

Complete our free assessment form or call us on 1300 889 743 today.

Which bank should I choose?

Did you know that each bank will assess your borrowing capacity in a different way?

  • Investors: Banks assess rent income and negative gearing benefits in very different ways. Investors with large portfolios are particularly affected in how much they can borrow because a lot of their funds are already committed.
  • Existing mortgages: Some lenders use a high assessment rate for your existing loans, whereas others don’t.
  • Large families: If you have more than two adults or three children in your household, each bank will assess your living expenses in completely different ways.
  • Many credit cards: The method of calculating the repayments on your credit card limits differs between each bank.

Which home loan should I select?

Choosing the right loan can have a large impact on your borrowing power.

Product features such as interest only repayments, fixed rates, variable rate discounts and lines of credit can all impact how much the lender will allow you to borrow.

Lenders all use different assessment rates for different loan types.

In particular, if you’re paying interest only some lenders will assess your repayments over a shorter loan term, which reduces the amount that you can borrow.

For example, if you have a 30-year loan with a 5-year interest only period, you have to pay the loan off over 25 years with higher than normal repayments after the 5-year interest only period is over.

Luckily, some lenders will use the actual interest only repayments in their assessment.

Typically this is only for your existing mortgages, not for new loans that you’re taking out.

As a result, people with several properties can borrow much more with these lenders.

Our brokers can find a lender that will take a common sense approach to your situation.

Complete our free assessment form or call us of 1300 889 743.

Will the bank accept your income?

Lenders can be very selective when calculating how much you can borrow.

Casual, contract and full-time employment are all treated differently by different lenders.

Even though a permanent employee and a casual employee might earn the same, the lender has to take into consideration the casual worker taking unpaid sick days or annual leave.

A casual employee is considered to be riskier and this perception alone can affect their borrowing capacity with some banks.

Income types such as overtime and bonuses are also assessed in different ways by different lenders.

For example, if you’re a shift worker who earns a significant amount of overtime, you may find that one lender uses only half your income while another uses the actual amount that you earn.

Please complete our free assessment form or call us on 1300 889 743 to find out what we can do for you.

Does your ex-partner pay child support?

One method to increase your borrowing power is to split your expenses with your ex-partner.

For example, if you had two children they may be classed as your dependants.

If you can prove that your ex-partner provides for them financially, then the banks will lend you more.

When determining your borrowing power some lenders will also consider Family Tax Benefits A & B depending on the age of your children.

Do you share a debt?

Did you know that if you have a debt with someone who isn’t part of the new loan application, banks will assume that you’re making all of the repayments on that debt?

For example, you have a $20,000 car loan that you took out with your partner and you alone are applying for a home loan with a bank.

Most banks will calculate your borrowing capacity as if the $20,000 personal loan is yours only.

In other words, they assume your partner isn’t making any repayments on the loan.

If you can show that the other person is able to cover their half of the repayments, some banks will only take into account your share of the debt.

This can seriously improve your borrowing capacity.

To find out which lenders can help, please contact one of our mortgage brokers by filling in our free assessment form or by calling us on 1300 889 743.

Do living expenses impact my borrowing capacity?

Lenders treat living expenses differently when calculating your borrowing power.

For big families, the differences can be huge.

In 2012, most lenders switched to the Household Expenditure Method (HEM) for calculating your living expenses.

The HEM offers a more realistic figure for living expenses than the Henderson Poverty Index (HPI) used previously.

Despite this, where you live can have just a bigger impact the size of your family unit.

In particular, borrowers living overseas and people who live in country and rural areas may not qualify for as large a loan as people in capital cities.

When estimating your living expenses, the bank will use your minimum living expenses as estimated by the HEM or your estimate, whichever is higher.

Be careful when estimating your living expenses as some banks will assume that your estimate doesn’t include expenses such as private school fees, pay television, private health insurance and gym memberships.

If they see these expenses in your bank statements, they’ll add them as a commitment in their serviceability calculator.

In other words, they are accidentally counting these expenses twice!

If you do have additional expenses such as a gym membership, some lenders can exclude these expenses if you confirm to them in writing that you’ve chosen to discontinue your membership.

The minimum living expenses for large families can vary significantly between lenders.

In most cases, living expenses will increase with each additional person in the household.

The great news is that some banks apply a cap on the living expenses, which favours larger families.

Contact one of our expert mortgage brokers today to find out how we can help you improve your borrowing power.

Complete our free assessment form or call us on 1300 889 743.

Extend the loan term

The longer the loan, the lower your repayments.

You’ll pay more interest on your loan over the long run but your repayments will be stretched out, reducing your fortnightly or monthly commitment.

30-year loans are quite common in Australia and you can even get 40-year mortgages with some lender.

This can increase your loan borrowing capacity because the repayments are lower with a 40-year loan.

Consider your borrowing power becomes limited the more you reduce your loan term.

On the flip side, the interest you pay also reduces!

We often recommend that you take out a longer loan term to improve your borrowing power and when your income increases at a later date, increase your repayments to pay off your loan well before the agreed 40-year term.

Need help with you mortgage strategy?

Please fill in our free assessment form or talk to one of our mortgage brokers on 1300 889 743.

Rent out your property

If you currently own a property, one option is to rent out the property instead of living in it.

Your borrowing capacity will increase due to the rent income and negative gearing benefits!

If you’re buying a property that is outside your price range, rent it out until you can afford to live in it yourself.

Even if you’re currently paying rent at the moment, you’ll find that you have a higher borrowing capacity by continuing to rent and buying an investment property.

The answer to ‘How much can I borrow for an investment property?’ can vary greatly between lenders due to their treatment of rental income and negative gearing benefits.

The method that the banks use to calculate how much tax deductible interest you can claim is either the one used by the Australian Taxation Office (ATO) or it’s more conservative.

You may find that one lender is able to lend you much more than another.

The benefit of this strategy is that you can move into the property at a later date when your income has increased or when you’ve reduced your debts.

What is a positive surplus?

Most banks will want a minimum surplus of one dollar per month after your debts are paid and your living expenses are budgeted for.

In order for you to meet serviceability, you’ll need to be one dollar positive on your surplus.

The minimum surplus shows that you have sufficient borrowing capacity and that you meet the policy of the lender.

However, if you’re borrowing 95% of the property value or you have a large amount of debt, lenders look for comfort that you have a higher surplus than just one dollar each month.

Save, save, save!

When considering a home loan, build up as much deposit in genuine savings or equity as quickly as you can.

Be sure to save for at least 3-6 months depending on the lender.

Set up a budget to help you save as quickly as possible.

By showing a savings track record, you can prove yourself as a low-risk borrower.

Can you afford the home loan?

When considering a home loan, you must ask yourself ‘can I afford the loan?‘.

Just because a bank can offer you a loan, doesn’t mean that you can afford it.

You alone know your cost of living and how much you can afford.

We don’t recommend that you borrow to your limit unless you have an income that the banks aren’t including in their assessment (such as bonus or commission income) or unless your situation will soon improve.

This can include financial help from your parents (via a guarantor or gifted deposit), an expected increase to your income or a reduction in your living costs.

To get a better understanding of your borrowing capacity, complete our free assessment form or call us on 1300 889 743.

How to increase home loan borrowing power?

Here are 11 practical tips to increase your home loan borrowing power.

  • Close or reduce your credit card limits. This is the easiest way to increase your home loan borrowing power.
  • Close unsecured debts such as personal loan, car Loan, HECS etc. If you have adequate savings to repay the debts this will enable you to maximise your borrowing capacity.
  • Reduce your living expenses for 3 to 6 months before applying for a home loan.
  • Apply for a longer loan term on your home loan. E.g. the amount you can borrow increases with a 30 year loan term than on a 25 year mortgage. Some lenders even offer a 40 year loan term.
  • Consider a fixed-rate home loan as this allows you to get assessed at a lower assessment rate.
  • Change repayment to interest only and go with a lender who considers actual repayment figures. This is only recommended if after the completion of interest-only period, you can make the principal and interest repayments comfortably.
  • Apply with a lender that has favourable lending policy for your income/employment type. E.g. some lenders will only use 50% of your bonus or overtime income to calculate your borrowing power, whereas other lenders will use the full bonus or overtime income. As always, applying with the right lender is key.
  • Split your expenses with your ex-partner. For example, if you have two children they may be classed as your dependents. But if you can prove that your ex-partner provides for them financially, then the banks will lend you more.
  • Consolidate unsecured debts into your existing mortgage to increase your home loan borrowing power.
  • Rent out your property instead of living in it. This allows you to use the rental income and negative gearing benefits in the borrowing power calculation, giving a significant boost to your borrowing power.
  • Check your credit report. Having a clear credit report means you qualify with more lenders and are not assessed at a higher assessment rate, giving your home loan borrowing power a small boost.

How can we help you get approved for the amount you need?

A simplified process to try to solve a loan scenario where your borrowing power is the main issue, goes something like this:

  • First we try to find a lender from our panel of almost 40 lenders that can do it within standard policy.
  • If no lender can do it then we try to get one to make an exception to policy.
  • If no lender can make an exception to policy then try to change the customers situation (e.g. buy a cheaper home / ask employer to waive probation). E.g. if you cancel your credit cards then you can borrow x amount.
  • Finally, if a change in situation is not possible then we’ll tell you what you need to do to qualify in the future and follow up with you.

Our mortgage brokers will work with you to get you the amount you need to buy your dream home, call us on 1300 889 743 or fill in our online assessment form to get started.

Why use us?

We aim to set an example by delivering what we promise: a higher level of service, better advice and better home loans.


Australia-wide services

We finance properties anywhere in Australia for people anywhere in the world.


Get incredible interest rates

Our relationships with our panel of lenders allow us to negotiate your interest rate.


We get tough loans approved

We can help you navigate the often complex pre-approval and application process.


Our customers love us

We receive hundreds of love letters from our customers.

Discover more reasons to use Home Loan Experts

How we find you the right solution

We get a complete understanding of where you’re at and what your ultimate goals are.
You’ll get a recommendation in just a few simple steps.

free assessment

Complete our free assessment form or call us.


We assess your situation.


We look at all the options from our panel of lenders.

suitable home loan deals

We will find you the most suitable home loan deals.

Testimonials for Home loan experts

about us


lenders on
our panel


lent Australia-wide
and counting

Common Wealth
St George
Pepper Money
Me Bank

of our borrowers get
approved with a major bank


of our borrowers get a discount
below the bank standard variable rate

Otto Dargan

Founder, Home Loan Experts

Secrets To Home Buying - Now At Your Fingertips.

Learn all the Home Buying Tips and Tricks banks don’t want you to know, from our experts with 15+ years of industry experience.

Powered by Home Loan Experts