How to boost your borrowing power without earning more

Lenders use a fairly predictable formula to decide how much they will lend you. Your income is one input, but it is far from the only one. You cannot double your salary overnight, but you can change almost every other lever the formula runs on, and the combined effect can lift your borrowing capacity by tens of thousands of dollars without a raise.

How lenders actually calculate borrowing power

Most Australian lenders start with your gross income, subtract income tax and the Medicare levy, then subtract a monthly living expenses figure. That figure is the higher of your declared expenses and the Household Expenditure Measure (HEM) benchmark for your household. The industry-standard HEM baselines used as a floor are around $1,600 per month for a single adult, around $2,300 per month for a couple, and an extra $500 per month for each dependent.

From the leftover surplus, the lender subtracts your existing commitments (personal loans, car loans, credit cards, HECS, Buy Now Pay Later). What is left is your monthly surplus. That surplus is then divided by the repayment on a hypothetical loan at the assessment rate, which is the actual interest rate plus an APRA-mandated buffer of at least 3 percentage points. A higher assessment rate means a smaller loan for the same surplus.

Every input on the expense side matters, because a small monthly reduction is amplified across a 30-year loan at a stressed rate.

Seven levers you can pull without earning more

These are the changes that shift the numbers most for a typical first home buyer.

• Close unused credit cards. Lenders count around 3.8% of the credit limit as a monthly commitment, even on a zero-balance card. Closing a $10,000 limit can lift borrowing capacity by roughly $50,000 to $60,000. Cancel the account in writing with the issuer, do not just cut up the card.
• Pay off and close BNPL accounts. Active Buy Now Pay Later facilities are increasingly treated as ongoing commitments. Clear the balance, then close the account before you apply.
• Be accurate on living expenses. Do not inflate the number to look thrifty, but do not lowball it either. Your bank will scan three to six months of statements. If your declared figure is well below your real spend, expect a revision and a delay. If it is well above HEM without cause, you have handed capacity away for no reason.
• Check whether clearing HECS/HELP is worth it. Compulsory repayments start once your repayment income passes $69,528. Up to $186,050, only the income above each threshold is charged at that band's rate; above it, the repayment is 10% of your whole repayment income. The repayment is set by your income, not by how much you owe, so a lump sum usually lifts capacity only if it clears the debt. That also removes cash from your deposit, so run the trade-off carefully.
• Consider a longer loan term. A 30-year loan has a lower assessed monthly repayment than a 25-year loan for the same amount, which can lift capacity by 10-15%. You pay more total interest over the life of the loan, but nothing stops you making extra repayments later.
• Use eligible government schemes. The First Home Guarantee removes Lenders Mortgage Insurance on a 5% deposit, and Help to Buy can reduce the amount you need to borrow by up to 30-40% because the government takes an equity share. Both dramatically change your effective purchasing power for the same salary.
• Apply jointly if that fits your life. A second income, even part-time, changes the surplus side of the formula significantly. Joint applications also share the HEM floor rather than doubling it.

A worked example

Consider a single applicant on $85,000 gross, with a $10,000 credit card limit and $5,000 left to repay on their HECS debt. On a standard 30-year loan assessed at around 10% (current variable rate plus the 3-point buffer), their maximum loan sits near $480,000.

Now they close the credit card, pay off the last of their HECS debt so the lender no longer counts a repayment, and check eligibility for the First Home Guarantee. Same salary, same rent, no lifestyle change. Their assessed capacity moves closer to $545,000, and the FHG removes the need for LMI on a 5% deposit, which changes what that borrowing capacity can actually buy.

What this means for you

• Audit every open credit facility (cards, BNPL, personal loans, car finance) before you apply. Closing the ones you no longer use is often the single biggest lever.
• Line up three to six months of clean, accurate statements before you approach a lender or a mortgage broker.
• Check which government schemes you may be eligible for. A scheme that removes LMI or takes an equity share often outperforms squeezing extra capacity out of the same income.

Run the numbers

A qualified mortgage broker can walk you through each lever against your own file. Before that meeting, model the levers yourself so you arrive with informed questions rather than a blank page.

• Borrowing Power Calculator to see how each lever (credit card limits, HECS repayments, loan term, HEM) changes your assessed capacity.
• Scheme Comparison Tool to compare the First Home Guarantee, Help to Buy and state grants against a traditional deposit path.
• Grant Stacker to check which grants and concessions may apply in your state and postcode.
• Deposit Savings Timeline to see how a lump sum used to close debt compares to the same lump sum kept in your deposit.