Are you wondering how to increase borrowing power? Then you have come to the right place!
Buying a home isn’t just about saving for a deposit — it’s about understanding how lenders see your financial story. Your borrowing power depends on more than income; it includes spending habits, credit health, and even the type of lender you choose.
This guide, written by an expert mortgage broker, reveals how to maximise your borrowing potential — especially if you earn from flexible or non-traditional sources — so you can approach your home loan with confidence.
1. Assess Your Financial Situation
The real estate market is constantly evolving, and buyers face challenges when navigating the lending landscape. Shifting interest rates have decreased your borrowing capabilities. Since rates started to rise, borrowing capacity has dropped by 30–40% compared to pre-rate increase levels.
This is why it’s crucial to assess your financial situation first
Try a Mock Mortgage to See What You Can Afford
Before talking to a bank or mortgage broker, calculate what you can comfortably pay each week. This is called a mock mortgage.
- Add up your current rent payments — e.g., $500 per week.
- Include your weekly savings — e.g., $100 per week.
- Add what you can comfortably take from living expenses — e.g. $50 per week.
Total weekly mortgage budget: $500 + $100 + $50 = $650 per week
Work Backwards to Determine Your Property Budget
Once you know your weekly mortgage budget, calculate what kind of home this allows.
It’s important to assess from your perspective:
- The bank may approve a $1 million loan, but if $1,000/week is unaffordable, that loan isn’t practical.
- Focus on what you can comfortably repay — e.g., $650/week — to ensure your home purchase is sustainable.
Read more: Barefoot Investor bank accounts explained
2. Improve Your Credit Score / Credit History
Why Your Credit Profile Matters
Your credit score and history play a major part in how much you can borrow. Lenders and banks use credit reports to assess how likely you are to repay a loan. According to Equifax, your credit score is a number between 0 and 1,200. A higher score means you’re viewed as a lower-risk borrower.
Lenders do not only consider your income and debts. They also review your credit profile, repayment history, and number of credit enquiries. Improving your credit score signals responsibility and lowers perceived risk. This can result in higher borrowing limits, lower interest rates, and increased chances of loan approval.
What Credit Score Ranges Look Like
Here are typical ranges in Australia from major credit bureaus:
- Equifax:
- Below average 0‑459
- Average 460‑660
- Good 661‑734
- Very Good 735‑852
- Excellent 853‑1,200
- Experian:
- Fair 550‑624
- Good 625‑699
- Very Good 700‑799
- Excellent 800‑1,000.
Knowing your score range gives you a clear target and helps you plan improvements before applying for a loan.
Practical Steps to Improve Your Credit Profile
Here are action-oriented tips you can implement immediately:
- Check your credit report annually: Review Equifax, Experian, or illion for errors or defaults.
- Pay bills and debts on time: Maintain at least six months of consistent repayments across credit cards, utilities, or loans.
- Avoid unnecessary credit checks: Hard inquiries can temporarily reduce your score.
- Reduce the number of open credit lines: Multiple unused accounts can signal potential risk.
- Fix any defaults or judgements: These remain on your file for years and can lower borrowing capacity.
Improving these areas demonstrates financial responsibility to lenders and can directly increase how much you are approved to borrow.
Real-World Example
Jane had a credit score of 650 and qualified for a $450,000 loan. After six months of paying all bills on time, closing an unused credit card, and reducing open lines, her score rose to 720. Her borrowing capacity increased by $25,000, simply by improving key credit metrics.
Important Note: Unlike in the U.S., you don’t need an extensive credit history to buy a home in Australia. Lenders consider your overall financial situation — income, savings, existing debts, and living expenses — rather than just your credit file. So if you have never used credit, you don’t need to worry.
3. Increase Income To Improve Borrowing Power
Why Lenders Care About Your Income
Your income is one of the main factors lenders use to calculate borrowing capacity. Even if your expenses remain the same, higher income increases how much you can comfortably repay. According to ASIC, lenders must assess your serviceability, meaning your ability to meet repayments now and if rates rise.
Higher income can also improve your loan options. Lenders may offer better interest rates or access to larger products if your repayments appear manageable.
Practical Ways To Boost Your Income
Here are actionable strategies you can implement to increase your borrowing power:
- Negotiate a pay rise or extra shifts – Ask for a promotion or additional hours at work. Even a 5–10% increase can raise your borrowing capacity by tens of thousands.
- Add side income – Freelance, contract work, tutoring, or rideshare opportunities can supplement your main income. Lenders often accept consistent side income if documented with invoices or bank deposits.
- Include rental or investment income – Income from a rental property or shares can boost serviceability. Ensure this is documented through tax returns and tenancy agreements.
- Combine incomes in a joint application – Including a partner’s income often increases borrowing power significantly. All applicants are equally responsible for repayments, so consider this carefully.
What Lenders Require
To count towards borrowing capacity, income must be:
- Proven with payslips, tax returns, or consistent bank deposits
- Stable over a reasonable period (typically 6–12 months)
- Regular, meaning occasional bonuses or one-off earnings may not always be included
Lenders like Commonwealth Bank, NAB, and Westpac all follow similar standards for assessing additional income sources.
Key Takeaways
- Even small income increases can meaningfully improve your borrowing capacity.
- Lenders value proven, consistent, and regular income.
- Side hustles, rental income, or joint applications are practical ways to increase serviceability.
4. Reduce Your Living Expenses (Outside Debt)
Lenders don’t just look at your debts or income — they also assess your household spending. The Household Expenditure Measure (HEM) is used to estimate typical living costs for Australians.
Your reported expenses affect serviceability. Even small reductions in everyday costs can increase how much a lender will let you borrow. This is especially important in today’s rising cost-of-living environment.
Quick Wins To Lower Monthly Expenses
Here are practical, actionable ways to reduce spending and boost borrowing power:
- Cut unused subscriptions. Cancel apps, streaming services, or memberships you rarely use. Even $20–$50 per month adds up over time.
- Review insurance and utility plans. Shop around for cheaper car, home, or health insurance. Check electricity and gas providers for competitive rates.
- Reduce discretionary spending. Limit dining out, coffee runs, and takeaway meals. Plan weekly groceries to avoid impulse purchases.
- Track expenses for 3 months before applying. Use budgeting apps like MoneySmart or Pocketbook. Identify recurring costs and trends to cut unnecessary spending.
Real-World Example
Alex and Mia reviewed their household expenses and cut $400 per month by cancelling subscriptions, switching utility providers, and limiting dining out. Their lender recalculated serviceability, and their borrowing power increased by approximately $20,000 — all without increasing income.
Key Takeaways
- Small lifestyle adjustments can meaningfully improve borrowing power.
- Tracking spending helps identify areas to cut without affecting essentials.
- Reducing expenses works hand-in-hand with debt reduction and income-boosting strategies to increase your borrowing power.
5. Save For A Larger Deposit To Borrow More
The size of your deposit directly affects your loan-to-value ratio (LVR). A lower LVR signals less risk to lenders, which can unlock:
- Higher borrowing limits
- Access to better interest rates
- Reduced or avoided Lenders Mortgage Insurance (LMI) costs
According to ASIC, borrowers with a deposit of 20% or more can save up to 1% per year on interest compared to low-deposit borrowers.
Practical Ways To Boost Your Deposit
Here are effective strategies to save faster and grow your deposit:
- Automatic transfers. Set up a recurring transfer to a high-interest savings account.
- Salary sacrifice or windfalls. Direct bonuses, tax refunds, or extra payments straight into your deposit fund.
- Cut discretionary spending. Reduce dining out, subscriptions, and unnecessary shopping.
- Rent out spare space. Short-term rentals or boarding a room can create additional income for your deposit.
- Sell unused assets. Consider selling vehicles, electronics, or collectibles you no longer need.
- Use government schemes. First Home Super Saver Scheme allows voluntary super contributions to grow tax-effectively for a deposit.
Key Takeaways
- Every extra dollar saved reduces your LVR and improves borrowing power.
- Combining multiple savings methods accelerates deposit growth.
- Higher deposits also improve your loan options and can save thousands in interest and LMI costs.
Read more: How to save house deposit in 12 months
6. Choose A Longer Mortgage Term
Lenders calculate borrowing capacity based on monthly repayment size, not just the total loan amount. By extending the term of your mortgage, your repayments decrease, which increases your serviceability. A lower repayment means the bank sees you can comfortably handle a larger loan.
Real-World Example
Consider an $800,000 loan:
- 25-year term: $4,700/month
- 30-year term: $4,150/month
That $550 monthly difference could translate into an additional $60,000–$90,000 borrowing capacity.
Trade-Offs To Consider
While longer terms increase borrowing power, there are some trade-offs:
- You pay more interest over the life of the loan.
- Not ideal if you can comfortably afford a shorter term.
- Best suited for borrowers needing short-term flexibility or aiming to enter the property market sooner.
Smart Strategies
- Make extra repayments when possible to reduce total interest.
- Refinance later if your income increases or rates drop.
- Combine with other strategies like a larger deposit or income boost to maximise borrowing power.
7. Choose The Right Home Loan Product
The type of home loan you choose can significantly affect your borrowing capacity and flexibility. Lenders consider loan structure, rate type, and repayment method when calculating your borrowing power. Choosing the right product can unlock higher borrowing power or lower monthly repayments.
Loan Types to Compare
- Variable vs Fixed Rate. Variable rates may provide lower assessment rates, increasing borrowing capacity. Fixed rates offer repayment stability but can reduce borrowing power if assessment rates are higher.
- Principal & Interest vs Interest-Only. Principal & interest loans reduce debt over time but have higher monthly repayments. Interest-only loans lower short-term repayments, improving serviceability, but do not reduce the principal.
- Loans for Self-Employed or Non-Traditional Income. Some lenders specialise in assessing income from freelancing, contracts, or casual work. These products often consider business profits or consistent deposits rather than standard payslips.
Real-World Example
Mark initially applied for a fixed-rate principal & interest loan at $800,000. By switching to a variable rate assessed at 9.25%, his lender approved a higher loan, increasing his borrowing capacity by $35,000.
Expert tip: Work with a mortgage broker to model different loan structures.
8. How Buying Together Can Increase Your Borrowing Power
Combining incomes, assets, and borrowing capacity can help you access larger loans and improve serviceability. Lenders consider all applicants’ financial profiles when calculating borrowing power. This strategy is especially useful for first-home buyers or investors who need a higher loan.
Types of Co-Borrowing
- Spousal or Partner Application. Both incomes are assessed to calculate total borrowing power. Ideal for couples planning to buy together.
- Family Guarantee (Parental Equity). Parents use their property as security to boost a borrower’s capacity. Often reduces the need for Lenders Mortgage Insurance (LMI).
- Friends or Investor Partnerships. Two or more non-family applicants pool incomes and deposits. Increases access to higher-value properties.
Cautions & Legal Tips
- Joint liability: Each borrower is responsible for the full debt, not just their share.
- Non-spousal partnerships: Always have a legal agreement outlining contributions, ownership, and exit strategies.
- Misunderstandings can lead to financial risk or disputes, so formal legal advice is essential.
Key Takeaways
- Joint applications can unlock higher borrowing limits and reduce individual financial pressure.
- Choose the right structure based on your relationship and financial goals.
- Always consider long-term implications and legal safeguards before applying jointly.
9. Use Online Calculators
One major challenge for borrowers over the last 2–4 years has been the drop in borrowing capacity — around 30–40%.
For example, someone earning $100,000/year could borrow $600,000–$700,000 previously. Now, borrowing power may be reduced to $500,000–$450,000. Many online calculators haven’t updated to reflect these changes, so use caution.
We suggest checking our calculator for the most up-to-date borrowing estimates. We also offer a free course to guide you through these strategies step by step.
How Do Online Calculators Work?
Banks assess your ability to repay a mortgage using the current rate plus a 3% buffer:
- If the current rate is 6%, banks assess affordability at 9%.
- When rates were 2%, banks assessed around 5%, explaining the recent drop in borrowing capacity.
Why Is My Borrowing Power Less Than Expected?
Borrowing power isn’t just affected by interest rates. Banks also use estimated living costs to calculate affordability:
- A few years ago, single-person living expenses were around $1,000/month.
- Today, these expenses have increased to about $2,000/month due to rising costs of living.
This combination of higher rates and increased expenses reduces borrowing capacity. Using an up-to-date calculator ensures your estimates are accurate.
Read more: Mortgage calculator
10. Leverage Government Grants and Schemes
Using government guarantees and schemes can boost your borrowing power and give you a head start in the property market.
The First Home Guarantee Scheme is a major change in recent years:
- The government acts as your guarantor, allowing a 5% deposit.
- Without this scheme, a 5% deposit would usually require Lenders Mortgage Insurance (LMI), often costing thousands.
How the Home Guarantee Scheme Works
- If you go into default, the government covers it, lowering lender risk.
- Banks may treat your 5% deposit as 20% for assessment purposes, increasing borrowing capacity.
Other Grants and Schemes
- First-Home Buyer Grants: One-off payments for new properties, sometimes up to $15,000 (state-dependent).
- First Home Super Saver Scheme: Save through superannuation with tax advantages, then withdraw for a deposit.
- Stamp Duty Concessions: State-based reductions or exemptions for first-home buyers reduce upfront costs, improving borrowing potential.
Read more: From Zero to Homeowner: How First-Time Homebuyer Grants Can Help
11. Get Pre-Approved
Pre-approval can protect and clarify your borrowing power in a constantly changing market.
Interest rates have shifted significantly. During COVID, the cash rate stayed flat for a long time, so borrowing capacity remained stable. Today, after 13 rate rises, borrowing power has decreased for many applicants (despite recent rate decreases). Pre-approval is now an essential way to hedge against rising rates.
How Pre-Approval Boosts Borrowing Capacity
- With a fully-assessed pre-approval, banks lock in your assessment rate.
- Example: If the current rate is 6%, the bank may assess you at 9% (6% + 3% buffer).
- Even if the Reserve Bank raises rates by 1% next month, your assessment rate remains 9% for 90 days.
- This ensures your pre-approved borrowing limit stays the same, giving you confidence when house-hunting.
Be Careful: Not All Banks Lock Rates
- Some banks will reassess your application if rates rise, even with pre-approval.
- A fully-assessed pre-approval looks at pay slips, living expenses, and financial commitments.
- A simpler pre-approval may only involve a credit check, which might not protect your borrowing limit.
- Working with an experienced mortgage broker ensures you understand which pre-approval protects your borrowing power best.
Tips for Applicants
- Confirm the type of pre-approval you are getting with your lender.
- Use a broker to secure a fully-assessed pre-approval that maximises your borrowing limit.
- Remember: Pre-approval doesn’t guarantee the final loan — final approval occurs post-offer acceptance.
Read more: What is pre approval? Here’s a plain and simple English answer
12. Be Flexible
Flexibility is key when buying your first home. Property prices in 2025 have risen, so the unit you planned for a few years ago may now be out of reach.
For example:
- You liked an apartment worth $600,000 and started saving for a deposit.
- After 2–3 years, your borrowing capacity hasn’t kept pace, and the property price has risen to $780,000.
- Instead of stretching your budget, being flexible lets you still enter the market at $600,000–$650,000.
How to Stay Flexible
- Your first home doesn’t need to be your forever home.
- Consider nearby suburbs with similar amenities that are more affordable.
- You can always upgrade later once your financial position improves.
Example: Next Suburb Over
- Looking at Ashgrove, Brisbane, a 3-bedroom home in 2025 may now sell for over $1,050,000.
- By exploring Mitchelton, you may find homes within $800,000–$850,000, closer to your budget.
- Using suburb reports and sales history can guide smarter choices.
At Hunter Galloway, we provide free customised property and suburb reports to help identify the best options for your budget.
Read more: 12 steps to research a home
13. Get Professional Advice
Buying a home is complicated, with many people and large sums of money involved. Online advice can be helpful, but not all of it is accurate. For example, some sources claim you need a credit file to buy a home — this is an American system, not the Australian process.
Why Professional Advice Matters
- Home-buying decisions carry significant financial risk.
- Misguided advice can cost thousands of dollars.
- Experts help you navigate complex steps, avoid pitfalls, and maximise borrowing power.
Key Experts to Include in Your Team
- Mortgage brokers – help secure the right home loan and pre-approval.
- Conveyancers or solicitors – ensure the legal side of your property purchase is safe.
- Buyers agents – assist in finding the right property and negotiating the best price.
Tips for Working with Professionals
- Always verify credentials before taking advice.
- Choose specialists experienced in your market and situation.
- Remember: a strong team can make the process smoother, faster, and more financially advantageous.
Read more: Putting together your homebuying team
Bonus: Can The Type Of Property Affect My Borrowing Capacity?
Your borrowing power isn’t just about income or deposit size — the type of property you buy can also make a difference.
For example, townhouses and apartments often have strata or body corporate fees. These ongoing costs reduce the amount the bank will lend you.
How it works:
- Strata fees vary depending on building size and amenities.
- Smaller buildings with minimal facilities usually have lower fees.
- Larger complexes with gyms, lifts, and common areas have higher fees.
Example
- Current borrowing capacity: $984,000
- Strata fees: $500/month (~$1,500/quarter)
- Adjusted borrowing capacity: $920,000
That’s a $64,000 reduction just because of the property type. Always factor in ongoing fees when calculating what you can afford.
How To Increase Borrowing Power FAQs
Does Equity Increase Borrowing Power?
Equity can improve your borrowing capacity because it reduces your loan-to-value ratio (LVR). More equity often unlocks better interest rates, lower fees, and may eliminate Lenders Mortgage Insurance (LMI). Using existing property equity or savings strategically can help you access higher loan amounts.
How Can I Increase My Borrowing Power Fast?
You can boost borrowing power quickly by paying off credit cards, lowering limits, and showing consistent savings for at least three months. Lenders may reassess serviceability after small financial changes, so improving cash flow can make a noticeable difference within weeks.
What Credit Score Do I Need for a Home Loan in Australia?
Most lenders prefer a credit score of 650 or higher, but specialist lenders like Pepper Money may accept lower scores if your overall finances are stable. A higher score can unlock better rates and more lender options. Always check your credit report before applying.
Can I Get a Home Loan If I’m Casually Employed or Self-Employed?
Yes. Some lenders assess casual or self-employed income differently. You’ll need consistent income records, like tax returns or bank statements over 6–12 months. Non-bank lenders often offer more flexibility for irregular income.
Does Reducing Everyday Expenses Really Help My Borrowing Power?
Absolutely. Lenders calculate your borrowing capacity based on declared living costs. Cutting non-essential spending — subscriptions, dining out, or premium plans — lowers assessed expenses and increases the amount you can borrow.
Does a Bigger Deposit Increase My Borrowing Power?
Yes. A larger deposit reduces your LVR and may open up better rates, fewer fees, and more lender options. It also reduces or eliminates LMI, saving thousands and strengthening your application.
Should I Choose a Longer Loan Term to Borrow More?
A longer loan term can increase borrowing capacity because monthly repayments are smaller. However, you’ll pay more interest over the life of the loan. It works best as a short-term strategy to get into the market sooner.
Can Applying With a Partner or Family Member Help Me Borrow More?
Yes — joint applications combine incomes, often significantly increasing borrowing power. Remember that all applicants are equally responsible for repaying the full loan, not just their share. Legal agreements are recommended for non-spousal partnerships.
I’m a First-Home Buyer — How Can I Compete in Today’s Market?
Improve your deposit and credit profile early. Explore First Home Guarantee, First Home Super Saver Scheme, and state grants to boost your buying position. Even a 5% deposit with the right lender can get you started.
What’s the Difference Between Borrowing Power for an Investor and an Owner-Occupier?
Investors can include projected rental income in their assessment, boosting borrowing capacity, but lenders apply stricter serviceability buffers. Owner-occupiers may access lower rates, while investors can sometimes borrow slightly more overall.
How Often Should I Check My Borrowing Power?
Check at least once a year, or whenever income, expenses, or interest rates change. Regularly recalculating ensures you know exactly how much you can afford before applying or refinancing.
Next Steps And Getting Your Home Loan Approved.
Our team at Hunter Galloway is here to help you buy a home in Brisbane. Unlike other mortgage brokers who are just one-person operations, we have an entire team of experts dedicated to helping make your home loan journey as simple as possible.
If you want to get started, please give us a call on 1300 088 065 or book a free assessment online to see how we can help.
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