Online calculators give a rough idea, but each lender runs its own serviceability model. Here’s what goes into it, and the levers you can pull.
The assessment rate
Lenders don’t test your repayments at today’s rate. They add a buffer and check you could still afford the loan if rates rose, in line with guidance from the banking regulator, APRA. This is why your borrowing power is usually lower than the repayments alone suggest.
Income
Base salary is counted in full. Overtime, bonuses, commissions, rental income and self-employed income are often discounted or averaged, and the treatment varies between lenders. This is one of the biggest reasons borrowing power differs from lender to lender.
Living expenses
Lenders compare your declared expenses with a benchmark for your household size and income, and use whichever is higher. They also review your bank statements, so it pays to know what your spending looks like before you apply.
Existing debts and credit limits
Car loans, personal loans, HECS-HELP and buy now, pay later accounts all reduce borrowing power. Credit cards are assessed on the limit, not the balance, so a card you rarely use can still cost you. Reducing or closing unused limits before applying can help.
Ways to improve your position
- Reduce or close credit card limits you don’t need.
- Clear small debts where it makes sense.
- Choose a lender whose policy suits your income type.
- Consider a longer loan term, or a structure that suits your goals.
We run your numbers across several lenders’ models before anything is lodged, so you know your realistic range without multiple credit enquiries on your file.