How much can I borrow for a home loan in Australia?

Type the question into Google and you get "4 to 5 times your gross income." That answer is wrong often enough to be dangerous. Two households earning the same $150,000 can be approved for loans that differ by $200,000, and a single change to a credit card limit can swing the result by tens of thousands. The number that matters is the one a lender's serviceability calculator produces, and that calculator runs on three inputs almost no online guide explains properly.

The three inputs that actually decide

Banks don't lend against your income. They lend against your net surplus after the regulator's stress test.

Net surplus.Take your after-tax monthly income. Subtract declared living expenses. Subtract every existing debt repayment (other home loans, car loans, HELP, the assessed repayment on credit-card limits even if you pay them off monthly). What's left is the cash a bank thinks you have to throw at a new mortgage.

The APRA serviceability buffer.This is the one most people miss. Since late 2021, every authorised deposit-taking institution must assess your loan at the quoted rate plus 3 percentage points. If your loan is offered at 6.25%, the bank tests whether you could still service it at 9.25%. The repayment you can "afford" on paper is the stressed one, not the advertised one.

The HEM floor.If your declared expenses are below the Household Expenditure Measure benchmark for your household size, postcode, and income bracket, the bank substitutes the HEM figure. Telling a lender you live on $1,800 a month doesn't buy you more borrowing power; it just gets you bumped to whatever HEM says a household like yours actually spends.

A worked example

Take a couple with $8,000 net monthly income, $3,500 in declared expenses (above HEM, so it stands), no other debts, looking at a 30-year loan at a quoted rate of 6.25%.

1. Monthly surplus: $8,000 − $3,500 − $0 = $4,500.
2. Apply a 20% comfort margin (the bank's headroom against unexpected costs): $4,500 × 0.80 = $3,600 sustainable monthly repayment.
3. Stress rate: 6.25% + 3.00% = 9.25% p.a.
4. Solve the standard P&I formula in reverse for principal at 9.25% over 360 months: maximum loan ≈ $437,000.

That's the number. A $150k household income, no debt, no kids on the books, lands around $437k of borrowing capacity in this rate environment. Add a $100k deposit and the target purchase price is $537k. The platform's borrowing power estimator runs exactly this math, and you can sanity-check the implied repayment in the mortgage calculator.

Why two banks quote you wildly different numbers

Run the same payslips past four lenders and you'll get four answers. The variance comes from policy choices APRA leaves to each bank.

• Living-expense floors. One lender's HEM table for a couple on $150k in a metro postcode might sit $400/month above another's. That alone shifts borrowing capacity by roughly $50,000 at current stress rates.
• Rental-income shading. Investors get 70% to 80% of gross rent counted as income, depending on the bank. The 10% gap on a $30k rental is worth real money in serviceability.
• Credit-card uplifts. Most lenders assess your card limit (not balance) at 3.0% to 3.8% per month. A $20,000 unused limit becomes a phantom $600-$760 monthly debt. Some lenders are softer on this; some are brutal.
• HEM bracket boundaries. Banks group households by income tier. Crossing a tier by a few hundred dollars can push you into a higher assumed-expense bucket and lose you tens of thousands of capacity.

What to do with this

Ballpark first. Run your figures through the borrowing power estimator to get an order-of-magnitude number before you take a single weekend off for inspections. Then get pre-approval from at least two lenders. The cost is your time and a credit enquiry; the upside is finding out whether you're a $500k buyer or a $650k buyer before you fall for a $620k house.

Once you have a target price, the other costs become the binding constraint. The stamp duty calculator handles the state-by-state tax, and the first home buyer guide covers concessions you may qualify for. Borrowing capacity tells you what a bank will lend; those tools tell you what the transaction actually costs to close.