How Much Can You Borrow for a Mortgage in 2026?

One of the first questions every home buyer asks is "how much can I borrow?" After a series of rate cuts through 2025, borrowing power has improved significantly heading into 2026. But understanding how lenders calculate your capacity is key to getting the best result.

How Banks Calculate Your Borrowing Power

Lenders assess your borrowing capacity using three main factors:

• Your income: Base salary, overtime, bonuses, rental income, and other regular earnings
• Your expenses: Living costs, existing debts, credit card limits, and HECS/HELP obligations
• The serviceability buffer: Banks must assess whether you can afford repayments at a rate 3% above the actual loan rate

The serviceability buffer is crucial. Even though actual rates have fallen, banks still stress-test at around 9% or higher, which limits how much you can borrow.

Borrowing Power Examples for 2026

Based on current rates and standard assessment criteria, here are approximate borrowing amounts for common income scenarios:

• Single income $80,000: Approximately $450,000 to $520,000
• Single income $120,000: Approximately $700,000 to $780,000
• Combined income $150,000: Approximately $850,000 to $950,000
• Combined income $200,000: Approximately $1,100,000 to $1,250,000

These figures assume no other significant debts and reasonable living expenses. Your actual borrowing power may vary.

What Reduces Your Borrowing Power

Several common factors can significantly reduce what you can borrow:

• Credit card limits: Even unused credit cards reduce capacity. A $10,000 limit can reduce borrowing by $30,000 to $50,000
• HECS/HELP debt: Compulsory repayments reduce your available income
• Buy now pay later: Afterpay and similar services are now assessed as liabilities
• Car loans and personal loans: Existing repayments directly reduce your capacity
• Living expenses: Banks use the Household Expenditure Measure (HEM) or your declared expenses, whichever is higher

How to Increase Your Borrowing Power

1. Cancel unused credit cards: Close cards you do not use at least 30 days before applying
2. Pay down existing debts: Prioritise clearing personal loans and car finance
3. Reduce living expenses: Lower your discretionary spending in the months before applying
4. Consider a longer loan term: A 30-year term increases capacity compared to 25 years
5. Add a co-borrower: A second income significantly boosts what you can borrow
6. Use a mortgage broker: Different lenders have different assessment criteria—a broker can match you to the lender that gives you the best result

Why a Broker Makes a Difference

Not all lenders calculate borrowing power the same way. Some treat overtime income more favourably, others are more generous with rental income or have lower expense benchmarks. A mortgage broker can compare dozens of lenders to find the one that maximises your borrowing capacity for your specific situation.