Borrowing capacity is not a percentage of your income. It is what remains after a lender has adjusted your income down, your expenses up, and tested the result at a rate higher than the one you will pay.
Which income lenders count in full, shade or ignore, how credit card limits and existing loans are assessed, and the changes that move your capacity within a month.
Understanding which adjustments apply is what explains why two households on the same salary receive different answers, and why online calculators are usually optimistic.
Not all income is treated equally. Some is counted in full, some is shaded, and some is ignored entirely.
| Income type | How it is usually treated |
|---|---|
| Base salary, permanent employment | Counted in full |
| Overtime and shift allowances | Shaded, with the proportion varying by lender |
| Bonus and commission | Shaded, and usually requires a two year history |
| Casual employment | Shaded, with a minimum period in the role |
| Rental income | Shaded to allow for vacancy and costs |
| Self employed income | Taken from tax returns, with add-backs restored where evidenced |
| Share schemes and RSUs | Frequently excluded entirely |
| Government family payments | Accepted by some lenders, excluded by others |
The variation between lenders on shading is substantial, and it is the main reason an application declined by one bank can be approved by another on identical figures.
On the other side of the calculation, lenders apply a floor to your living expenses and assess debts on the worst case rather than the actual payment.
The serviceability buffer is the single largest factor and is explained in the serviceability buffer.
Three of these move the number within a single statement cycle, which makes them worth doing before you apply rather than after a decline.
ASIC’s general guidance is at Moneysmart home loans. For an indicative figure use the borrowing power calculator.
Because generic calculators use your stated income and expenses without applying the lender’s benchmarks, shading rules or assessment buffer. A real assessment counts credit card limits rather than balances, applies a minimum living expense figure for your household, and tests the repayment at a rate above the one you would actually pay.
Yes. Lenders test whether you could still meet repayments if rates rose, by adding a margin to the actual rate and assessing against that higher figure. This applies to the new loan and to any existing loans you hold, which is why each additional property reduces capacity by more than its actual repayment suggests.
Usually yes, and often by more than people expect. Lenders assess the full limit as though it were drawn, applying a notional monthly repayment against it. Reducing a limit or closing an unused card removes that commitment from the calculation entirely, and the change shows up as soon as the statements reflect it.
Substantially. Lenders differ on how much overtime, bonus, commission and rental income they count, on their living expense benchmarks, and on how they treat government payments and share schemes. The same household can receive materially different figures from two lenders on the same day, which is why lender selection matters before applying.
Capacity is a calculation with inputs you can influence. Limits, small debts and lender choice are the three that move it fastest.
Read more about residential lending or investment lending, or read how much you can borrow.
Ask us for a real capacity assessment.
Paritosh Wadhwani | Director and Principal Broker, APW Finance
Member of the Finance Brokers Association of Australia (FBAA). Arranging residential, commercial and specialist lending for Sydney clients across a panel of more than 50 lenders.
APW Finance Pty Ltd, 304/20a Lexington Drive, Bella Vista NSW 2153. Email: info@apwfinance.com. Phone: +61 447 959 546.
ACN 620 646 479 | ABN 79 620 646 479
This guide is general information only. It does not take into account your objectives, financial situation or needs, and it is not financial or credit advice. Lending criteria, interest rates, duty thresholds and government schemes change, and every application is subject to lender approval. Consider whether this information suits your circumstances and seek independent advice before acting. Figures quoted are current at the date below and should be confirmed before you rely on them. Last reviewed: October 2026.
APW Finance Pty Ltd delivers expert lending solutions with personalised service, empowering clients across residential, commercial, and business sectors.