How to Improve Your Borrowing Power in Australia (2026 Guide)

How Do Banks Actually Calculate Your Borrowing Power?

Before diving into strategies, it's worth understanding the machinery. Australian lenders use three overlapping constraints, whichever limits you most becomes your ceiling:

• Serviceability buffer (APRA): Your loan is stress-tested at your actual rate plus 3%. A 6.5% variable loan is assessed at 9.5%. This is the single biggest constraint for most borrowers in 2026.
• Household Expenditure Measure (HEM): Lenders use the higher of your declared living expenses or the Melbourne Institute's HEM benchmark for your household type. A single person's HEM is around $2,350/month; a couple with two dependants is closer to $3,800/month.
• Debt-to-Income (DTI) cap: APRA guidance limits lending to approximately 6× your gross annual income. At a $150,000 household income, that's a $900,000 ceiling, regardless of serviceability math.

Your maximum loan is calculated by finding the loan amount where monthly repayments at the assessment rate exactly exhaust your monthly net income after expenses. This is why small changes to expenses or income have outsized effects on the final number.

8 Ways to Maximise Your Borrowing Power in 2026

1. Reduce Your Credit Card Limits, Not Just the Balance

This is the most overlooked lever. Banks don't assess your credit card balance, they assess 3.5% of your total credit limit per year, divided by 12. A $20,000 credit limit costs $583/month in assessed expenses, even if the balance is $0.

Closing or reducing limits before applying can free up significant capacity. A couple with two $15,000 credit cards (total $30,000 limit) who reduce both to $3,000 saves $735/month in assessed expenses, equivalent to roughly $75,000 in additional borrowing power at current assessment rates.

Action: Cancel any cards you don't use. Request limit reductions on cards you keep at least 60 days before applying.

2. Apply Jointly, Dual Income Compounds Quickly

Joint applications are assessed on combined income but expenses scale less than proportionally. Key advantages:

• Each applicant is taxed separately, more tax-efficient than treating income as combined
• HEM for a couple is only ~30% higher than for a single person, not 100% higher
• The 6× DTI cap applies to combined gross income, roughly doubling the ceiling

A couple earning $90,000 each ($180,000 combined) can borrow substantially more than double what either could individually, because living costs are shared and the HEM scales sub-linearly.

3. Pay Off Personal Loans and Car Finance First

Every dollar of existing monthly debt repayments reduces your assessed surplus. A $400/month car loan reduces your borrowing capacity by approximately $40,000–$50,000 (at the 9.5% assessment rate over 30 years).

If you have savings earmarked for a deposit, sometimes it's mathematically better to clear a personal loan first, especially if the remaining balance is small. Run the numbers with your broker before deciding.

4. Declare All Eligible Income, Correctly

Lenders shade different income types at different percentages:

• PAYG base salary: 100%
• Overtime and bonuses: 80% (need 2 years history, must be regular)
• Rental income: 80% (vacancy buffer applied)
• Contractor / casual: 80% (need 12–24 months continuous history)
• Second job: 80% (need 12 months continuity in that role)
• Dividends / trust distributions: 50–100% depending on lender

A broker will match your income profile to lenders with the most favourable recognition policies for your situation, some lenders accept ABN income after 12 months where others require 24.

5. Build Employment Continuity Before Applying

Most lenders require you to have passed your probation period (typically 3–6 months in role). Changing jobs right before applying resets this clock. If a salary review is imminent, waiting until it's confirmed in writing, and reflected in payslips, can meaningfully boost your assessed income.

Self-employed applicants typically need two full ATO-confirmed financial years. If you're in your first year of self-employment, plan 12–24 months ahead and keep your financials clean.

6. Choose the Right Lender, HEM and Policy Vary Widely

Not all lenders apply the same HEM table, income policies, or assessment rates. The difference between a conservative lender and a progressive one can be $50,000–$100,000 for identical applicants. Key variations:

• Some lenders apply metropolitan HEM to all borrowers; others use lower regional rates
• Credit unions and mutual banks sometimes use lower HEM benchmarks than the Big 4
• Some lenders allow exceptions for high-income borrowers with documented low expenses
• Policy on declared expenses vs HEM differs: some take the higher, some take declared

This is the strongest argument for using a mortgage broker, we can model your scenario across 30+ lenders in one sitting and identify who will give you the best outcome.

7. Consider New Builds for Investment (Post-2026 Budget)

Following the 2026 Budget negative gearing reforms, new residential builds are the only property type that remains fully negatively gearable against all income from 1 July 2027. For investors, this makes new builds structurally more cash-flow-efficient, which can affect how a lender views your rental income contribution and overall capacity to service a loan.

Some lenders also offer slightly more favourable LVR thresholds or LMI premiums for new builds, particularly in government-assisted projects.

8. Extend to a 30-Year Loan Term

A longer loan term reduces the required monthly repayment, which increases assessed borrowing capacity. The difference between a 25-year and 30-year loan can add $40,000–$60,000 to your limit. You can always make extra repayments to pay it off faster, the term is a serviceability floor, not a ceiling.

This strategy is most effective when combined with offset accounts, which reduce the effective interest paid without changing the minimum repayment commitment.

The DTI Cap, 2026's Hard Ceiling

APRA's 6× DTI guidance means high earners hit a hard ceiling that serviceability alone would not impose. At $200,000 gross income, borrowing capacity is capped at roughly $1.2M regardless of how comfortable the monthly payments would be. For borrowers approaching this ceiling, the only lever is gross income, either increasing it (with a raise, second applicant, or additional income stream) or working with a lender that has a slightly higher DTI tolerance for strong-profile borrowers.

What a Broker Does That a Calculator Can't

Online calculators, including ours, give useful estimates but miss the nuances that determine your actual outcome:

• Lender-specific HEM rates and declared-expense policies
• Income recognition differences (e.g., 12- vs 24-month ABN requirements)
• Credit policy exceptions for high-LVR or high-income scenarios
• Structuring a joint application to optimise each applicant's contribution
• Upcoming policy changes that might close or open windows

A broker runs your scenario across 30+ lenders in minutes and finds the one most likely to maximise your borrowing power at the lowest rate. Book a free consultation to get an accurate picture before you make an offer.

Frequently Asked Questions

How much can I borrow on a $100,000 salary in 2026?

At a 6.5% rate assessed at 9.5% (APRA buffer), a single applicant earning $100,000 can typically borrow $500,000–$580,000 depending on living expenses, debts, and credit card limits. Use our Borrowing Power Calculator for a personalised estimate.

Does a credit card affect borrowing power even if I pay it off every month?

Yes. Lenders assess 3.5% of your credit limit per year, not your balance. A $10,000 limit costs $29/month in assessed expenses regardless of whether the card has a zero balance.

Can I improve my borrowing power quickly?

Yes. Reducing credit card limits and paying off short-term debts can improve your position within 60–90 days. Lender-switching (finding a lender with more favourable policies) takes no time at all, it happens at application.

Does applying for multiple loans hurt my borrowing power?

Each credit enquiry appears on your credit file. Multiple enquiries in a short period can signal risk to some lenders. A broker submits one pre-approval application to the most suitable lender, protecting your credit file.

What is the maximum loan most people can get in 2026?

The 6× DTI cap limits most borrowers to 6 times their gross income. At the median household income of ~$110,000, that's around $660,000. However, lenders also apply serviceability tests, so the effective limit may be lower depending on rates and expenses.