Mozo guides

What determines your home loan borrowing power?

cheerful woman holds a comically large key in front of new house

Ready to purchase a property, but aren’t sure how much you can borrow? One of the first steps when working out your budget for a home is calculating your borrowing power

What is your borrowing power?

Borrowing power affects the amount of money you can borrow. The higher your borrowing power is, the more expensive a property you can afford. 

It’s based on your overall financial situation, not just your income or how many assets you already have. So, what do lenders look at when they calculate your borrowing power?

What do lenders look for when calculating your borrower power?

When you’re shopping for a new home, you’ve likely got criteria you want your own home to have. Well, lenders have certain criteria too, just for the people they’re loaning money to.

How much you can borrow varies from lender to lender, but most banks look at the same factors to calculate your borrowing power. They include: 

  • Your relationship status
  • How many dependents you have
  • Your income/s 
  • Your living expenses
  • Your debts and current repayments 
  • How long you plan to have your mortgage
  • The home loan interest rate
  • Your mortgage serviceability if rates go up. 

Let’s go into more detail about a few of the main considerations lenders make when calculating your borrowing power. 


The amount of money you earn plays a big part for lenders assessing whether you can afford their mortgage or not. 

Of course, combining your income with another person, like a partner, sibling, or friend, can improve your borrowing power and help you take out a larger loan. 


Regardless of whether you’ve got enough income to support a home loan, if you’re a big spender, it can hurt your borrowing power. 

The money you spend is viewed as money that could otherwise go towards making repayments. So, the more you spend, the more your borrowing power shrinks. 


Debts are a big one. If you’ve got a couple of credit cards and are paying off a personal loan, not only will you look like a risky bet to your lender, but your borrowing power will also go down. 

To help increase your borrowing power, try to reduce the amount of debt you have. Essentially, you should be aiming to free up more of your income.

How much can I borrow for my home loan?

father with child on his lap looking at home loans

If you’re wondering how to calculate your own borrowing power, then using a borrowing power calculator is a great place to start. While it’s not a guaranteed method, these calculators give you an estimate of how much you can borrow. Of course, the calculation can differ depending on the lender.

If you’re looking to get into the property market soon, check out Mozo’s home loan guides and tips. Alternatively, start comparing home loans below.

Jack Dona
Jack Dona
Money writer

Jack is RG146 Generic Knowledge certified, with a Bachelor of Communications in Creative Writing from UTS, and uses his creative flair to cut through the financial jargon and make home loans, insurance and banking interesting. His reader-first approach to creating content and his passion for financial literacy means he always looks for innovative ways to explain personal finance. Jack's research and explanations have been featured in government publications, and his work is regularly featured alongside major publications in Google's Top Stories for Insurance.