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Credit card limits, buy now pay later accounts, HECS-HELP debt, dependants and existing loans can all cut how much a lender will approve. Here's how each one works.
Your borrowing capacity depends on more than your salary. Lenders also count your credit card limits, buy now, pay later accounts, HECS-HELP repayments, the number of dependants in your household and any existing loans. Each one reduces the income a lender considers available for repayments, so each can lower the amount you’re approved for.
Most people assume their borrowing capacity comes down to how much they earn. Income is a key factor, but lenders look at the full picture of your financial position, and there are several things unrelated to your salary that can reduce how much you are able to borrow.
Understanding these factors before you apply can help you address any issues early and avoid surprises during the assessment process.
How lenders work out your borrowing capacity
Lenders start with your income, subtract tax and any compulsory deductions, then subtract your living expenses and the repayments on your existing debts. What’s left has to cover the new loan’s repayments, assessed at an interest rate higher than the one you’ll pay. That extra margin, known as the serviceability buffer, is there to check you could cope if rates rose.
Because the calculation works on what’s left over, anything that reduces your net income or adds to your commitments shrinks your borrowing capacity, even if your salary stays the same. The five factors below are the ones that most often surprise applicants.
1. Credit card limits
Lenders assess credit cards at their full limit, not the outstanding balance. A credit card with a $15,000 limit is treated as a $15,000 debt regardless of whether you owe $500 or nothing at all.
Many lenders assume a monthly repayment of around 3% of each card’s limit when they run the numbers. On that basis, a $15,000 limit adds roughly $450 a month to your assessed commitments.
If you have multiple cards or a high combined limit, this can reduce your borrowing capacity. Reviewing your credit card limits before applying is worth discussing with a mortgage broker as part of your preparation. Reducing a limit or closing a card you don’t use is often one of the quickest ways to improve your position.
2. Buy now, pay later accounts
Buy now, pay later balances and active accounts are increasingly scrutinised as part of the home loan assessment process. Since June 2025, buy now, pay later products have been regulated under Australia’s credit laws, and home loan lenders treat them as credit commitments when they review your application.
Even small balances can be flagged, and multiple active accounts can signal to a lender that your discretionary spending is higher than your bank statements alone might suggest. Before you apply, clear any outstanding buy now, pay later balances and close the accounts you no longer need. Our guide to whether BNPL or online betting will affect your mortgage application covers how lenders read your bank statements, and these three things to know about buy now, pay later explain how the products work.
3. HECS-HELP debt
Student debt through the HECS-HELP scheme can affect your net income, as repayments are automatically deducted from your salary once you earn above the repayment threshold. Lenders factor this into their serviceability assessment, which means a significant HECS balance can reduce your borrowing capacity even if your gross income looks strong. The larger the debt and the higher your income, the more noticeable the impact is likely to be.
Lenders generally look at the compulsory repayment coming out of your pay, not the balance owing. If you’re close to paying off your HECS-HELP debt, let your broker know, as some lenders may take that into account. See our summary of the major HECS debt changes for how recent reforms changed balances and repayments.
4. Number of dependants
Lenders use living expense benchmarks that increase with the number of dependants in a household. Two applicants with identical incomes can have different borrowing capacities because one has children and the other does not.
Most lenders compare your declared living expenses with a benchmark such as the Household Expenditure Measure (HEM) and use whichever is higher. The benchmark rises with each dependant, which reduces the surplus income available for loan repayments.
This is not something you can change, but it is important to understand when you are working out what you can borrow and planning around it. Be accurate about your actual spending too. Childcare, school fees and private health insurance are often listed separately from the benchmark.
5. Existing loan commitments
Any existing debt, including a car loan, personal loan, novated lease or an existing mortgage, can affect the amount a lender is willing to extend on a new loan. Each commitment reduces your assessed capacity to service additional debt. For applicants with several existing debts, the impact on borrowing capacity can be significant, even when each individual loan seems manageable on its own.
Lenders also look at your total debt relative to your income. Under APRA’s limits on high debt-to-income lending, banks can only write a limited share of new loans to borrowers whose total debts are six times their income or more. Our article on APRA’s debt-to-income limits explains how this affects borrowers with several loans.
If you’re carrying several smaller debts, a debt consolidation loan can sometimes reduce your total monthly commitments, though it depends on the rate, fees and term. Weigh up whether consolidating debt saves you money before you go down that path.
| Factor | How lenders typically treat it | What you can do before applying |
|---|---|---|
| Credit card limits | Assessed on the full limit, not the balance | Reduce limits or close unused cards |
| Buy now, pay later | Active accounts and balances can be flagged | Clear balances and close unused accounts |
| HECS-HELP debt | Compulsory repayment reduces net income | Tell your broker if you’re close to paying it off |
| Dependants | Higher living expense benchmark | Provide accurate expenses and plan around it |
| Existing loans and leases | Each repayment reduces available income | Pay off small debts or review your structure |
How to check your borrowing capacity before you apply
Online borrowing power calculators give a rough guide, but each lender applies its own policy to the factors above. One lender may treat a novated lease, a HECS-HELP debt or a self-employed income differently from the next, and the gap in the approved amount can be large.
If terms like LVR and LMI are unfamiliar, our guide to mortgage terms explained covers them. Before you apply, work through four common reasons home loan applications are declined and the steps in how to get mortgage ready in 2026. If you’re buying with someone else, read about joint home loans and buying property together, because lenders combine both applicants’ debts as well as their incomes.
A mortgage broker can review your position, show you which commitments are holding your borrowing capacity back and compare home loan options across lenders. First home buyers can also explore first home buyer loans and government schemes. Attain Loans is a mortgage broker in Melbourne’s west that can run your numbers across its lender panel, subject to each lender’s assessment.
This article is general information only and doesn’t take into account your objectives, financial situation or needs. Consider whether it’s appropriate for you and speak with a licensed professional before making a decision.
Further questions
Does HECS debt affect borrowing power?
Does a credit card limit reduce borrowing capacity even if I pay it off each month?
How can I increase my borrowing capacity?
Does having a guarantor increase borrowing power?
What is the HEM benchmark?
This is general information only and is subject to change at any given time. Your complete financial situation will need to be assessed before acceptance of any proposal or product.
