How much you can borrow for a home loan in Australia comes down to your income, your living expenses, your existing debts and your deposit, all run through a serviceability test that assumes interest rates are higher than they are today. As a rough starting point, many households land somewhere around five to six times their gross annual income, so a couple earning $150,000 between them might borrow in the region of $750,000 to $900,000, though that range moves a lot once real debts and expenses go in.
That headline is the one everyone wants, and for a quick gut check it does the job. But the gap between the rule of thumb and what a lender will actually approve can be tens of thousands of dollars in either direction. The rest of this explains what moves the figure, and how to get one you can rely on.
What actually determines your borrowing power
Lenders are not really asking how much you want. They are asking how much you can repay if things get tighter, and they work backwards from there. Five things do most of the heavy lifting.
- Income. Your gross household income is the foundation, but not all income counts equally. Base salary is taken at full value, while bonuses, overtime and commissions are often discounted because lenders treat them as less reliable.
- Living expenses. Lenders measure your declared spending against a benchmark called the Household Expenditure Measure, or HEM, and use the higher of the two. Big spenders get assessed on what they actually spend.
- Existing debts and commitments. Credit cards, car loans, buy-now-pay-later and study debt all chip away at capacity, by more than most people expect.
- Deposit size. A bigger deposit means a smaller loan relative to the property value, which lowers risk. A 20 per cent deposit also lets you sidestep Lenders Mortgage Insurance.
- The serviceability buffer. Lenders do not test you at today’s rate. They add a buffer on top, and this single rule quietly trims borrowing power across the board.
Get those five right and you can estimate your own ballpark before you talk to a bank.
The serviceability buffer, explained
Here is the part that surprises first-home buyers. To work out whether you can afford a loan, a lender does not use the rate you will actually pay. They add a safety margin on top, then check you could still meet the repayments at that higher, hypothetical rate.
Under guidance from the banking regulator, APRA, that buffer has sat at around 3 percentage points above the loan’s assessment rate, last checked June 2026. So if your real rate is, say, 6 per cent, the lender tests you as though you were paying around 9 per cent. You will not pay that, but you have to prove you could.
The logic is reasonable: it builds in a cushion so borrowers are not pushed to the edge the moment rates rise. The effect on borrowing power, though, is blunt. A higher assessment rate means higher hypothetical repayments, so a smaller loan clears the test, and capacity moves with the market: when rates rise, the same income borrows less.
Lenders do not ask whether you can afford the loan today. They ask whether you could still afford it if rates climbed three points. Pass that test, and the loan is yours.
The income-multiple rule of thumb, with caveats
The five-to-six-times-income shortcut is useful for a first pass, and the table below shows roughly where different household incomes might sit. Treat every figure as indicative only.
| Gross household income | Indicative borrowing range (5x to 6x) | Indicative property price |
|---|---|---|
| $80,000 | $400,000 to $480,000 | $500,000 to $600,000 |
| $120,000 | $600,000 to $720,000 | $750,000 to $900,000 |
| $150,000 | $750,000 to $900,000 | $940,000 to $1.13m |
| $200,000 | $1.0m to $1.2m | $1.25m to $1.5m |
These are illustrative ranges for mid-2026, assuming modest expenses and no significant debts. They are not quotes, and a lender’s own assessment can land well outside them.
The caveats matter more than the rule. The multiple shrinks fast if you have dependants, because children push up your assessed living expenses. It shrinks if you carry debt. And it varies widely between lenders, because each sets its own assessment rate and expense benchmarks: two banks can read identical paperwork and land $100,000 apart. The rule of thumb gets you to the right suburb, not to the front door.
What quietly reduces how much you can borrow
If your estimate looks healthy but a lender comes back lower, the culprit is usually one of these. The thread running through them: lenders care about commitments, not just balances.
- Credit card limits, not balances. This catches almost everyone. Lenders assess your total credit card limit, not what you owe, counting a few per cent of the limit as a monthly commitment. A $20,000 limit you never touch can still cut your borrowing power by tens of thousands, so trimming unused cards before you apply is one of the simplest levers you have.
- HECS or HELP debt. Study loan repayments are income-tested and come straight off your assessable income while the balance lasts. The effect is larger at higher incomes, where repayment rates step up.
- Car loans and personal loans. A car loan repayment is treated as a fixed commitment for the life of the loan. A $600-a-month car payment can knock a meaningful chunk off your maximum.
- Buy-now-pay-later and other facilities. Small recurring commitments add up, and lenders increasingly fold them into the assessment.
The pattern is consistent: a lender models the worst reasonable case, so available credit weighs against you even when you manage it comfortably.
Deposit, LMI and the real cost of a smaller deposit
Your deposit shapes both how much you can borrow and what it costs. The benchmark to know is 20 per cent of the property value: reach it and you generally avoid Lenders Mortgage Insurance, a one-off cost that protects the lender, not you, if you default.
You can buy with less, and plenty of first-home buyers do with deposits as low as 5 to 10 per cent, but the trade-off is LMI, which can run into the thousands or tens of thousands and is often added to the loan rather than paid upfront. We unpack the numbers in our guide to how Lenders Mortgage Insurance works. A smaller deposit also means a larger loan, which must still clear the same buffered serviceability test, so a thin deposit can constrain borrowing power from both directions at once.
How to get a real figure, not a guess
The rule of thumb is a starting line, not a finish. To get a number you can act on, run your real figures through a borrowing power calculator, which gets you far closer than any multiple because it factors in the buffer, your debts and your expenses together. From there, a licensed mortgage broker can compare how different lenders would assess you, since the spread between them is where a borderline application is often won or lost. If you are buying your first place, our first home buyer guide covers the wider process, including the grants and schemes that can stretch a smaller deposit.
A quick note on the figures. This is general information, not personal financial advice, and the numbers are indicative ranges last checked June 2026. Rates, lender policies and regulatory settings change, and your own borrowing capacity depends on your full circumstances, so check them against your situation and consider a licensed mortgage broker before you commit.
The bottom line
How much you can borrow for a home loan in Australia starts with a rough five-to-six-times-income rule, but the figure that actually matters is the one left after a lender adds the serviceability buffer, measures your spending against the HEM benchmark, and subtracts every commitment you carry. Higher rates and higher expenses shrink the number, a bigger deposit and fewer debts expand it. Before you fall for a property, trim the credit card limits you do not use, be honest about your spending, and let a broker show you how lenders would treat you. The rule of thumb tells you roughly where you stand. The careful version tells you what you can safely buy, and those are not always the same number. All figures here are indicative and last checked June 2026, so model your own before you sign anything.