Banks apply two caps: a debt-to-income (DTI) cap of about 6× income, and an APRA serviceability buffer that qualifies you at the contracted rate plus 1.5pp. We compute both and surface the binding one — so you know which constraint to optimise for.
What we model: APRA serviceability buffer = rate + 1.5pp · DTI cap = 6× combined gross income · HEM scales with band + dependants · Investor loans add 0.25–0.40pp on contracted rate. Estimates only — your broker will price against multiple lender policies.
Same borrowing capacity, four deposit scenarios. Higher deposit = higher target price ceiling but more capital tied up.
Borrowing power (also called borrowing capacity or maximum loan amount) is what an Australian lender will offer based on your income, debts, and household profile. It's not the same as what you should borrow — banks set the ceiling, your cashflow sets the floor.
Two regulatory caps determine the number: APRA's debt-to-income (DTI) recommendation of 6× annual gross income, and APRA's serviceability buffer requiring lenders to qualify you at the contracted rate plus 1.5 percentage points. The lower of the two binds your borrowing power.
The Australian Prudential Regulation Authority (APRA) recommends lenders cap loans at 6× gross household income. For a household earning $185,000/year, that's $1,110,000 in total debt. Some lenders go higher with exceptions; most don't.
Lenders must check that you can service the loan at your contracted rate plus 1.5 percentage points. So if you're quoted 6.55%, the bank tests you at 8.05%. This protects against future rate rises and is why a "I can afford the repayments today" number isn't enough to get the loan.
LVR is your loan divided by the property's value. A 20% deposit gives 80% LVR — the standard threshold below which most lenders won't require Lenders Mortgage Insurance (LMI). Above 80% LVR you'll typically pay LMI, which can add 1–3% of the loan amount to your costs.
Above 95% LVR, only a handful of lenders will lend; rates rise materially; LMI gets expensive. First-home buyers can sometimes access the federal Home Guarantee Scheme to bypass LMI at 5% deposit — eligibility limited by income and price caps.