Borrowing Power Calculator

Borrowing power is the maximum amount a lender will let you borrow based on your financial position. It is not a fixed number. It changes with your income, your debts, your spending habits, and even the type of property you want to buy.

Lenders look at several key factors when assessing how much they will lend you:

• Gross income — your salary or wages before tax, plus any regular overtime, bonuses, or commission. If you have a partner applying with you, both incomes are counted.
• Existing debts — any current home loans, personal loans, car loans, HECS-HELP debt, and credit card limits (not balances, limits). Every dollar of existing debt reduces what you can borrow.
• Living expenses — what you actually spend each month on essentials and discretionary items. Lenders compare your declared expenses against benchmark figures and use whichever is higher.
• Credit history — missed payments, defaults, or a thin credit file can all reduce the amount lenders are willing to offer. A clean payment history works in your favour.
• Property type — lenders may lend less on certain property types, such as small apartments under 50 square metres, rural properties, or units in high-density developments. These are considered higher risk and may attract lower loan-to-value ratios.
• Rental income from existing properties — if you already own investment properties, the rent they generate can help your borrowing power, though lenders discount it (more on this below).

Each lender weighs these factors slightly differently, which is why your borrowing power can vary by tens of thousands of dollars depending on who you ask. A mortgage broker can help you identify which lenders are most favourable for your situation.

If you are buying your first investment property, getting a clear picture of your borrowing capacity is the first step before you start looking at suburbs and properties.

When you apply for a loan, the bank does not just check whether you can afford repayments at today's interest rate. They test whether you could still afford them if rates went up significantly. This is called a serviceability assessment, and it is the single biggest factor determining how much you can borrow.

The assessment rate buffer. APRA (the Australian Prudential Regulation Authority) requires lenders to assess your ability to repay at an interest rate at least 3 percentage points above the loan's actual rate. So if the product rate is 6.2%, the bank tests your serviceability at 9.2%. This buffer exists to protect both you and the lender from rate rises. It is also the main reason your borrowing power might feel lower than you expected.

Household Expenditure Measure (HEM) vs actual expenses. Lenders assess your living costs using either the Household Expenditure Measure (HEM), which is a benchmark based on ABS data for households of your size and income level, or your actual declared living expenses, whichever is higher. HEM represents a modest but adequate standard of living. If your actual spending on things like dining out, subscriptions, and discretionary items pushes your expenses above HEM, the lender uses the higher figure. This can reduce your borrowing power noticeably.

Rental income shading. If you earn rental income from an existing investment property, the bank will not count 100% of it. Most lenders "shade" rental income to 80%, meaning they only count $400 of every $500 per week you receive. The 20% discount accounts for vacancy periods, maintenance costs, and management fees. This is true even if you self-manage your property and have never had a vacancy.

HECS-HELP and credit cards. Your HECS-HELP debt reduces your net income for serviceability purposes, because the compulsory repayments come out of your salary. Credit cards are assessed on the full limit, not the current balance. A credit card with a $15,000 limit that you never use still reduces your borrowing power as if you owed the full $15,000. Closing unused cards before applying can make a real difference.

Owning one investment property and wanting to buy a second is one of the most common situations where borrowing power becomes complicated. Your existing mortgage reduces your capacity, but the income from your current property adds to it. The net effect depends on the numbers.

Your existing mortgage counts as a debt. The lender includes your current investment loan repayments in your total commitments, assessed at the buffer rate (not your actual rate). If your existing investment loan is $450,000 at 6.2%, the bank tests the repayment as if the rate were 9.2%. That is a significant monthly commitment that directly reduces what you can borrow for property number two.

Rental income helps, but not dollar for dollar. The rent from your existing property is added to your income, shaded to 80%. If your tenant pays $550 per week ($28,600 per year), the bank counts roughly $22,880 as income. That shortfall between actual rent and assessed rent means your existing investment property usually has a net negative impact on borrowing power, even if it is positively geared in reality.

Interest-only vs principal and interest. The structure of your existing loan matters. If your current investment loan is interest-only, the repayments assessed for serviceability are lower, which leaves more room to borrow. However, some lenders assess all loans on a principal-and-interest basis regardless of the actual product, so this varies. Your mortgage broker will know which lenders take a more favourable view.

Equity as a deposit source. Even though your existing mortgage reduces borrowing power, the equity you have built in your current property can serve as the deposit for the next one. If your property has grown in value or you have paid down the principal, you may be able to access usable equity without saving a separate cash deposit. This is a common way landlords build from one property to two or three.

The interaction between these factors is why many investors find they can borrow less for their second property than they could for their first, even if their salary has gone up. Running the numbers before you start property hunting saves you time and avoids disappointment at auction.

To see how these factors play out together, here is a simplified example for a single-income earner looking to buy a second investment property.

The scenario:

• Gross salary: $120,000 per year
• Existing investment loan: $400,000 at 6.2% (principal and interest, 25 years remaining)
• Rental income from existing property: $520 per week ($27,040 per year)
• Living expenses: $2,800 per month (above HEM for a single person at this income)
• HECS-HELP debt: $18,000
• Credit card limit: $8,000
• No other debts

What the bank sees:

• Assessable income: $120,000 salary plus $21,632 rental income (80% of $27,040) = $141,632
• HECS repayment: roughly $6,000 per year at this income level, reducing net income to about $135,632
• Living expenses: $33,600 per year
• Existing loan repayment at buffer rate (9.2%): roughly $3,580 per month, or $42,960 per year
• Credit card commitment: assessed at roughly 3% of the limit per month, or $2,880 per year

After subtracting these commitments from assessable income, the remaining surplus determines how large a new loan repayment you can support, tested at the buffer rate. In this example, the surplus is roughly $56,000 per year, which at the 9.2% assessment rate could support a new loan of approximately $530,000 to $560,000 depending on the lender.

This is an estimate only. Every lender calculates differently, and small changes to any input can shift the result by tens of thousands of dollars. The point is that even on a solid $120,000 salary, an existing $400,000 mortgage meaningfully constrains your next purchase. Getting a formal assessment from your lender or broker is essential before you commit. For a broader look at what buying an investment property actually costs beyond the purchase price, see our guide to the cost of owning a rental property in Australia.

If your borrowing power is not where you need it to be, there are practical steps that can shift the numbers. Some take effect immediately, while others need a few months of groundwork.

Pay down or close existing debts. This is the highest-impact move. Personal loans, car loans, and afterpay-style accounts all reduce your borrowing power. Credit cards are assessed on the full limit, so closing a card you rarely use can free up capacity instantly. If you have a $20,000 credit card limit, reducing it to $5,000 or cancelling the card entirely removes that commitment from the bank's calculations.

Increase your income. A pay rise, a promotion, or a side income that appears on your tax return all improve your assessed income. If you receive regular overtime or commissions, make sure you have documentation covering at least the last two years, as many lenders need a track record before they will count variable income.

Reduce your living expenses. If your declared expenses are well above HEM, cutting back on discretionary spending in the three to six months before applying can help. Lenders will review your bank statements, so this is not just about what you declare on the form. Subscriptions, frequent dining out, and gambling transactions are the categories that tend to draw attention.

Extend the loan term. A 30-year loan term produces lower assessed repayments than a 25-year term, which means more room for additional borrowing. This is a trade-off, as you will pay more interest over the life of the loan, but it can make the difference between getting approved and falling short.

Choose interest-only for the investment loan. Opting for an interest-only structure on the new loan reduces the assessed monthly commitment, leaving more surplus income for the serviceability calculation. Not all lenders treat this favourably, so check with your broker.

Raise the rent on existing properties. If your current rent is below market rate, a rent increase before you apply lifts your assessed rental income. Even a modest increase of $20 to $30 per week adds over $800 to $1,200 in annual assessed income (after the 80% shading).

None of these are magic fixes, and each comes with its own trade-offs. But in combination, they can genuinely move the dial on how much a lender will approve. Talk to your mortgage broker early so you know which levers matter most in your situation.