The journey to buying a home in Australia can be exhilarating yet daunting, largely due to the complex process of securing a favorable home loan. One key aspect that potential homeowners must navigate is their borrowing capacity. This article aims to demystify the concept of borrowing capacity and provide actionable tips to help Australians not only understand it better but also find ways to increase it, enhancing their ability to secure better loan terms and larger amounts.

What Is Borrowing Capacity?

Borrowing capacity refers to the maximum amount of credit that a lender is willing to extend to you, based on a thorough assessment of your financial situation. This includes an analysis of your income, existing debts, expenses, number of dependents, and crucially, your credit score. Your borrowing capacity directly influences not only the amount you can borrow but also the terms of the loan, impacting your purchasing potential and the type of property you can afford.

Our Top 3 Tips to Improve Your Borrowing Capacity

Improving your borrowing capacity can open up more opportunities for securing a favorable home loan. Whether you’re looking to buy your first home or invest in property, enhancing how much you can borrow is crucial. Here are our top three tips to help you boost your borrowing power effectively:

Tip 1: Improve Your Credit Score

Improving your credit score is a powerful step towards increasing your borrowing capacity. Here are practical steps to achieve a better credit rating:

  • Check for Errors on Your Credit Reports: Regularly review your credit reports for inaccuracies that could be unfairly lowering your score.
  • Pay Bills on Time: Consistency in paying bills on time can significantly enhance your credit score.
  • Reduce Credit Card Limits: Lowering your credit card limits can decrease your potential debt levels, making you more attractive to lenders.


A higher credit score generally means lower risk for lenders, which can result in more favorable loan terms such as lower interest rates and higher borrowing limits.

Tip 2: Increase Your Income and Reduce Your Debts

Increasing your income and reducing your debts are two sides of the same coin that work synergistically to boost your borrowing capacity:

  • Increase Your Income: Consider options like taking on additional work, seeking promotions, or finding a higher-paying job. Every extra dollar earned increases your repayment capacity.
  • Reduce Your Debts: Focus on paying off high-interest debts first, consider debt consolidation to lower interest rates, and maintain a disciplined budget to manage expenses more efficiently.

Tip 3: Choose the Right Lender and Loan Type

Not all lenders are created equal, and finding the right one could mean a difference in thousands of dollars:

  • Varying Lender Flexibility: Different lenders may assess income and debts differently. Shopping around can help find more favorable assessments of your financial situation.
  • Consult a Mortgage Broker: Brokers like Will Bell Mortgage Broker can offer invaluable advice on choosing lenders and loan types that best fit your financial profile.


By following these strategies, you can significantly enhance your borrowing capacity, making it easier to achieve your property ownership or investment goals.

Long-Term Strategies to Maintain and Enhance Borrowing Power

Maintaining and enhancing your borrowing power requires long-term commitment and financial acumen:

  • Regular Savings: Consistently saving money can demonstrate financial responsibility to lenders.
  • Invest in Superannuation: Increasing your superannuation contributions can not only secure your retirement but also improve your borrowing capacity.
  • Ongoing Financial Education: Staying informed about financial management and market conditions can help you make better financial decisions.

Can Changing Jobs Affect My Borrowing Capacity?

Yes, changing jobs can affect your borrowing capacity, especially if it leads to a higher income or more stable employment. However, lenders often require a period of employment stability, so it’s important to time such changes carefully.


Increasing your borrowing capacity is not an overnight fix but a result of deliberate financial decisions and habits. By improving your credit score, increasing your income, reducing your debts, and choosing the right lender, you can significantly enhance your loan eligibility and terms.

Frequently Asked Questions About Increasing Borrowing Capacity

The quickest way to increase your borrowing capacity is by reducing your outstanding debts and increasing your income. Making larger payments towards high-interest debts and possibly increasing your income through additional jobs or higher-paying roles can have a swift impact.

Your partner’s income can positively affect your combined borrowing capacity if it is included in the loan application. This additional income can demonstrate greater financial stability and capacity to repay, which might increase the loan amount you qualify for together.

High-interest debts such as credit card debts and personal loans are typically the most detrimental to borrowing capacity. These types of debts indicate higher financial risk to lenders and reduce the amount they may be willing to lend.

It’s a good practice to review your financial status annually or whenever there is a significant change in your financial circumstances, such as a change in employment, salary, or major expenses. Regular reviews help you adjust your financial planning to improve or maintain your borrowing capacity.

In Australia, lenders usually offer loans up to six times your annual salary, but this can vary widely depending on your financial situation, other outstanding debts, and the lender’s criteria.

Yes, you can potentially increase the loan amount after initial approval, but this usually requires a re-assessment of your financial situation and borrowing capacity. You may need to provide additional documentation or evidence of improved financial stability, such as increased income or reduced debts.

Picture of Will Bell

Will Bell

Will Bell has 15 years’ experience in the finance industry, the last 11 years he has owned and operated Will Bell Mortgage Broker. He specializes in residential home loans and over the years has carved out a trusted brand. This is proven by the reviews his customers have made regarding the service and the experience he has provided.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.


Services we offer:

  • First Home Buyer Loans
  • Property Investment Loans
  • Mortgage Consultation
  • Loan Prequalification
  • Debt Consolidation
  • Refinancing
first home buyers melbourne
buying a house checklist