How Much Can I Borrow? Home Loan Borrowing Power in Melbourne 2026
"How much can I borrow?" is the first question almost every buyer asks us - and the honest answer is: it depends on more than your salary. Your borrowing power is the maximum a lender will let you borrow based on your ability to repay, and in 2026 that calculation is stricter than many people expect. This guide explains exactly how lenders work it out, why two banks can give you wildly different numbers, and the practical levers that can lift your limit before you apply.
Dahiya Mortgage & Finance is an independent brokerage based in Lyndhurst, Victoria. We compare home loans across more than 40 lenders for buyers right across Melbourne's south-east, and we hold Australian Credit Licence #388570. The figures and policies below reflect what we are actually seeing in the 2026 market.
What "Borrowing Power" Actually Means
Borrowing power is not a fixed number attached to your income. It is the result of a lender's serviceability calculation: how much loan you can repay after your living costs, existing debts, and a safety buffer are taken into account. The same applicant can be approved for $620,000 with one lender and $740,000 with another on identical financials, purely because of different policies.
The Five Things Lenders Assess
1. Income
Lenders start with your gross (before-tax) income. Base salary is counted in full. Overtime, bonuses, commissions, allowances, rental income and self-employed earnings are treated more cautiously - often only 80 percent of rental income counts, and most lenders want two years of consistent overtime or self-employed history before they include it. How a lender treats your particular income mix can swing your limit dramatically.
2. Living Expenses
Every lender applies a minimum living-expense benchmark (the Household Expenditure Measure, or your declared spending if it is higher). The more dependants you have and the higher your declared lifestyle costs, the lower your capacity. Three months of bank statements are reviewed - so the spending habits in the lead-up to your application genuinely matter.
3. Existing Debts and Commitments
Car loans, personal loans, HECS/HELP, buy-now-pay-later and credit cards all reduce capacity. Critically, credit cards are assessed on the full limit, not the balance. A $15,000 limit you keep "just in case" can cost you around $60,000-$70,000 of borrowing power.
4. The Serviceability Buffer
This is the single biggest factor people overlook. Under APRA rules, lenders must assess your repayments at an interest rate roughly 3 percent above the actual rate. So if your real rate is 5.9 percent, the bank checks you could still afford repayments at around 8.9 percent. This buffer is why your borrowing power feels lower than the repayments you know you could comfortably manage.
5. Deposit and Loan-to-Value Ratio
Your deposit determines your loan-to-value ratio (LVR). A 20 percent deposit avoids Lenders Mortgage Insurance (LMI). With less than 20 percent you can still buy, but LMI applies - unless you use a guarantor or an eligible government scheme such as the First Home Guarantee.
A Rough Guide (and Why It's Only a Guide)
As a very general rule, many Melbourne households can borrow somewhere between four and six times their gross annual income, before other debts are factored in. A single applicant earning $90,000 with no other debts might land near $450,000-$540,000; a dual-income couple on $160,000 combined might see $700,000-$850,000. These are illustrative only - your real number depends entirely on the five factors above and the specific lender. Treat any online calculator as a starting point, not a pre-approval.
Seven Practical Ways to Increase Your Borrowing Power
Reduce or close credit card limits. The fastest single lever - cut limits you do not need before applying.
Pay down or consolidate personal and car loans. Clearing a $400/month car loan can add roughly $60,000+ to your capacity.
Tidy up your spending for three months. Lenders read your statements; consistent, modest spending helps.
Apply with the right income evidence. If you have two years of overtime or bonuses, the right lender will count it.
Consider a longer loan term. A 30-year term lowers assessed repayments versus 25 years, lifting capacity (at the cost of more total interest).
Choose the right lender. Some lenders are far more generous on serviceability for certain income types - this is where a broker earns their keep.
Use a guarantor or government scheme where eligible to remove the deposit barrier.
Owner-Occupier vs Investment Borrowing
If you are buying an investment property, lenders count a portion of expected rent (commonly 75-80 percent) toward your income, but they also price and assess investment loans slightly more conservatively. Many investors structure loans interest-only for the early years for cashflow and tax reasons - always alongside your accountant. See our investment loans page for how we structure these.
Common Mistakes That Quietly Shrink Your Limit
Leaving large unused credit card limits open.
Applying to multiple banks directly and accumulating credit enquiries.
Forgetting to disclose HECS/HELP or buy-now-pay-later commitments.
Assuming the bank you currently use will offer the most - it rarely does.
Treating an online calculator number as money you can actually spend at auction.
How a Broker Maximises Your Borrowing Power
Because every lender calculates capacity differently, the single most effective thing you can do is have your scenario assessed across the whole market before you apply. As an independent broker, we run your numbers through multiple lenders' serviceability models, identify which lender treats your income and structure most favourably, and arrange a pre-approval you can buy with confidently. Our service is free to you - the lender pays us a commission after settlement. Compare our full range on the home loans page.
Frequently Asked Questions
How is my borrowing power calculated?
Lenders take your gross income, subtract living expenses, existing debt repayments and a serviceability buffer, then convert the affordable repayment back into a loan amount at an assessment rate around 3 percent above your actual rate.
Why do different banks give me different limits?
Each lender uses its own expense benchmarks, income policies and buffer. Two lenders can differ by $100,000+ on the same application.
Does a credit card reduce how much I can borrow?
Yes - lenders assess the full limit, not the balance. A $10,000 limit can cut borrowing power by roughly $40,000-$50,000.
Can I borrow more with a guarantor?
A family guarantee can let you borrow up to 100-105 percent and avoid LMI without a 20 percent deposit. It removes the deposit hurdle rather than raising income capacity.
Find Out Your Real Number
The only borrowing figure worth acting on is one backed by a lender. Book a free assessment with our Lyndhurst team and we will give you real numbers from multiple lenders - call (03) 9005 4079 or 0404 129 000, or visit our home loans page to get started.