How to Increase Your Borrowing Capacity: 9 Steps

Key takeaways

Banks test your repayments at your loan rate plus at least 3 percentage points, so every monthly commitment costs you borrowing power.
Credit card limits count even when the balance is zero. Cutting a limit you don’t use is often the fastest win.
Bonuses, overtime and rent are usually discounted by at least 20%, so document them well.
A HELP debt you’ll repay within about 12 months may be left out of the assessment, if the lender agrees.
Lenders’ policies differ widely. The same application can produce very different limits at different lenders.

Your borrowing capacity is what a lender believes you can afford to repay, tested against higher rates than you’ll actually pay. You can’t change the lender’s rules, but you can change what goes into them. These nine practical steps, from cutting credit card limits to choosing the right lender, can increase how much you can borrow without stretching your budget.

How lenders work out how much you can borrow

A lender starts with your income, takes away tax, living expenses and the repayments on every debt you have, then checks whether what’s left covers the new loan. The key numbers come from APRA, which regulates the banks:

Serviceability buffer: At least 3 percentage points above the loan rate
Credit cards: Example repayment of 3% of the full limit per month
Rent and variable income: Discounted by at least 20% in prudent practice
Debt-to-income limit: Since February 2026, at most 20% of new loans at 6 times income or more

The DTI limit applies to each bank’s lending overall, not to you personally, and APRA said in May 2026 it isn’t restricting lending in aggregate. It’s one reason very high borrowing relative to income is harder to get.

Steps 1 to 3: shrink what lenders count against you

1. Cut credit card limits you don’t use

Lenders assess the limit, not the balance, because you could spend it tomorrow. APRA’s guidance uses 3% of the limit each month as an example.

Hypothetical example

A $15,000 credit card limit counts as about $450 a month. At an assessment rate of 9.20% (a 6.20% loan rate plus the 3 point buffer) over 30 years, $450 a month supports roughly $55,000 of borrowing. Cancel the card and that capacity may come back. A car loan costing $600 a month is worth about $73,000 on the same basis.

2. Pay down or clear personal debts

Personal loans, car loans and buy now pay later accounts all take repayments out of your budget. Clearing a small loan with savings can lift your capacity by more than the balance, but keep enough cash for your deposit and costs.

3. Tidy up and document your spending

Lenders read your bank statements and compare your declared expenses with benchmarks for households like yours. Cancel subscriptions you don’t use and cut discretionary spending in the months before you apply. Declare your expenses honestly; understating them to borrow more is misleading and can leave you with a loan you can’t afford.

Want a real number, not a guess?

Phillip can run your figures through several lenders’ calculators and show you which steps would make the biggest difference for you.

Book a free consultation

Steps 4 to 6: make all your income count

4. Show every source of income

Base salary counts in full. Bonuses, overtime, commissions and rental income are usually discounted (APRA’s guidance says by at least 20%), and lenders usually want to see a track record. Gather payslips, tax returns and rental statements early. If you’re self-employed, see our page on self-employed home loans.

5. Understand how your HELP debt is treated

Compulsory HELP repayments reduce your take-home pay, so lenders count them. Following updated ASIC (opens in a new tab) and APRA guidance in 2025, a lender may leave them out if you’re expected to repay the debt within about 12 months. Policies vary, so this is where comparing lenders pays.

6. Choose a 30-year loan term

A longer term lowers the assessed repayment. In a hypothetical example, a $4,000 monthly surplus at a 9.20% assessment rate supports about $488,000 over 30 years, against about $469,000 over 25 years. You’ll pay more interest over the life of the loan unless you make extra repayments.

Steps 7 to 9: structure and lender choice

7. Apply with a co-borrower

A partner’s or family member’s income can lift capacity, but every borrower is responsible for the whole loan. If a parent wants to help without borrowing, a guarantee is another option; our blog on family financing options explains the differences.

8. Check your credit report

You can get your credit report free every 3 months from each credit reporting body. Errors, such as a default that isn’t yours, can be fixed free of charge. A clean report won’t raise your capacity directly, but it keeps more lenders available to you.

9. Choose the right lender

Every bank must use at least the 3 point buffer, but lenders differ on how they treat overtime, rental income, HELP debts and living expenses. Non-bank lenders aren’t bound by APRA’s buffer, although they must still lend responsibly under ASIC’s rules. The result: the same application can produce quite different limits. This is where a broker who compares lenders earns their keep.

Borrowing capacity is not the same as your budget

The loan a lender will approve is only half of your buying budget. Your price range is roughly your borrowing capacity plus your savings, less the costs of buying: transfer duty, conveyancing, inspections, loan fees and lenders mortgage insurance if your deposit is under 20%. First home buyers in NSW may pay less duty, or none.

It works the other way too. A bigger deposit doesn’t change what you can afford to repay, but it can avoid LMI, open up more lenders and lower your rate. Check duty on a target price with our NSW transfer duty calculator.

Borrow what you can repay, not just the maximum

Start with our borrowing power calculator, then get pre-approval before you make offers. If your deposit is under 20%, read what lenders mortgage insurance costs as well.

Frequently asked questions

Usually, yes. Lenders assess credit cards on the limit, not the balance. APRA’s guidance gives 3% of the limit per month as an example repayment, so a $15,000 limit counts as about $450 a month even if you owe nothing. Closing it, or cutting the limit, before you apply removes that commitment. Keep one card with a modest limit if you need it for travel or emergencies.

Yes, because compulsory HELP repayments come out of your pay. Since 2025, APRA and ASIC guidance lets lenders take your circumstances into account. APRA gives the example that a lender may leave HELP repayments out of the assessment if you’re expected to repay the debt within 12 months. This is up to each lender’s policy, so it’s worth comparing lenders if you have a small HELP balance.

Online calculators use simple assumptions. A lender uses your actual expenses and bank statements, adds at least a 3 percentage point buffer to the rate, counts every debt and credit limit, and discounts non-salary income. Some calculators skip one or more of these steps. Treat an online result as a starting point and ask for a proper assessment before you make offers.

Yes, a little. Spreading repayments over 30 years instead of 25 lowers each repayment, so the same budget supports a bigger loan. In our hypothetical example it added about $19,000. The trade-off is more interest over the life of the loan, although you can still make extra repayments to pay it off sooner if your loan allows it.

It’s the minimum margin APRA requires banks to add to your loan’s interest rate when checking whether you can afford it. Since 2021 it has been 3 percentage points, and APRA confirmed in May 2026 that it stays at that level. So if your rate is 6.20%, the bank tests your budget as if the rate were at least 9.20%.

Sources

This article is general information only and doesn't take your objectives, financial situation or needs into account. Figures and eligibility rules change; check the official sources above or talk to us before you act. Keystone Home Loans Pty Ltd ATF BEMA Family Trust, Credit Representative Number 564704 is authorised under Australian Credit Licence Number 384704.

Written by

Phillip Bui

Founder and Principal Mortgage Broker at Keystone Home Loans, based in Arncliffe, NSW. Accredited Mortgage Broker and Full Member of the Mortgage & Finance Association of Australia (MFAA).

How to Increase Your Borrowing Capacity: 9 Practical Steps

How lenders work out how much you can borrow