Glossary · Australian property
Borrowing capacity.
The maximum loan amount a lender will offer based on your income, expenses, existing debts, and APRA-mandated stress tests. Sets the ceiling on what you can spend. Deposit determines the minimum.
Borrowing capacity is a function of (a) your gross household income, (b) HEM-benchmarked living expenses, (c) existing debt service (other loans, credit-card limits, HECS), and (d) APRA's serviceability buffer (current contracted rate + 3.0%). Lender policy varies on add-backs: rental-income credit (60-80% of declared rent), bonus/commission credit, second-job credit, and HECS handling differ between majors and non-majors.
Buying power = borrowing capacity + deposit − stamp duty − legal/conveyancing − LMI (if applicable). APRA-mandated DTI cap (typically 6.0-6.5× gross household income) overlays serviceability. You can fail one even when the other passes. Loan brokers know which lender policy is most generous on each input. Same household, different lenders, can differ by $100-200K.
Levers (in order of effect): pay down credit-card LIMITS (banks count the limit not balance), reduce other-loan exposure, switch HECS from take-home-pay to gross calculation (some lenders), add second-applicant income, time the application to a high-bonus quarter.
Worked example
$150K household, no kids, no other debt, $20K credit-card limit, 30-year P&I. At 6.5% contracted plus 3.0% APRA buffer (tested at 9.5%): typical capacity ~$700-800K depending on lender. Cut credit-card limit to $5K and that same household can extend ~$30-50K more.
Source
APRA APG 223 §44-58 (serviceability assessment); ASIC Responsible Lending guidelines (RG 209).
Related terms
Open the playbook — 11 chapters end-to-end, every threshold cited.