How much can I borrow? What lenders count as income in 2026

Published 16 October 2026 · Updated 16 October 2026 · 7 min read · By Shane Heness, mortgage broker

The question turns up in nearly every first call, usually inside the first two minutes. How much can I borrow. The honest answer is that it depends less on what you earn than on how your income is shaped, what limits you carry, and whose calculator the file lands in. We have run one household through two lenders in an afternoon and watched the answer move by $250,000.

So this is the mechanics rather than a number. A capacity figure produced without your documents in front of it is a guess, and usually an optimistic one. Tax questions, including what your deductions do to your return, belong with your accountant. This is general information about lending, not tax, legal or financial product advice.

What a servicing calculator is doing

Every lender runs the same four steps in roughly the same order. It decides which of your income it will count, and at what percentage. It deducts living expenses, using the higher of what you declare and a benchmark it applies to households like yours. It deducts your existing commitments, including limits you have never drawn. Then it loads the new repayment with a buffer and checks that what is left over is still positive.

That is the whole exercise. The rate on a lender's home page barely touches the answer. Steps one and three decide it.

What lenders count as income

Base salary is the easy part. Everything else gets shaded, and the shading is where most of the disappointment lives. Somebody on $95,000 base plus $40,000 of overtime does not have $135,000 of assessable income at most lenders. They have $95,000 plus roughly $32,000, and only if the overtime has enough history behind it to be accepted at all.

Indicative across the LoanBuddy panel at October 2026. Every lender sets its own shading percentages and qualifying periods and changes them without notice, so read this as the shape of the problem rather than a quote.

Two rows do more work than the rest. Essential services overtime is why a nurse and an office worker on identical gross pay can sit a long way apart, because a few lenders take the full amount for one and shade the other. Self-employed income is why a good year followed by a quiet one reads worse than two steady average years. Our piece on how lenders assess income and employment covers probation, casual and contract work in more detail.

Living expenses, and why declaring less does not help

Lenders do not simply accept what you write down. APRA's practice guide expects them to use the greater of your declared expenses and a benchmark scaled to your income, household size and location. Declaring $1,200 a month for a family of four does not produce a bigger loan. It produces the benchmark instead, plus an assessor reading the rest of the file more carefully. The benchmark excludes rent and mortgage repayments, which are added on top.

The commitments side

This is where capacity leaks quietly, usually from things people have stopped thinking about.

• Credit card and overdraft limits are counted as if fully drawn, at an indicative 3 to 3.8 per cent of the limit per month across our panel, whatever the balance is.
• Buy now pay later accounts are counted as a commitment, and a pattern of them reads badly well beyond the dollars involved.
• HELP debt is counted as a compulsory repayment. On the ATO's 2026-27 thresholds, repayments start above $69,528 at 15 cents in the dollar, so a $95,000 income carries about $318 a month.
• Novated leases and car loans are counted at the actual repayment, and a balloon payment due inside the next year or two gets attention.
• Guarantees you have given for someone else's loan sit in your file as a contingent liability and can be counted in full.

The two ceilings

The first ceiling is the assessment rate. APRA confirmed on 28 May 2026 that the serviceability buffer stays at three percentage points, and lenders may apply their own floor above that. The average advertised owner occupier variable rate was reported at 6.63 per cent on 7 October 2026, which puts the test rate at 9.63 per cent. Here is what that does to one file.

Repayments on a 30 year principal and interest term. The 6.63 per cent figure is the average advertised owner occupier variable rate reported at 7 October 2026, and 9.63 per cent adds the three percentage point APRA buffer confirmed on 28 May 2026. Credit card commitment at 3.8 per cent of the limit per month, indicative across the LoanBuddy panel at October 2026. HELP repayment on the ATO 2026-27 thresholds.

The gap is about $2,438 a month, or roughly $29,000 a year of income the lender needs to see that you will not actually spend. That is not an error in the calculator. It is the calculator doing the job the regulator asked for. It is also why trimming a credit limit can beat a pay rise: $760 a month of phantom commitment is close to $89,000 of capacity.

The second ceiling arrived in February 2026. APRA now caps each bank at 20 per cent of new mortgage lending at a debt to income ratio of six times or more, measured quarterly and counted separately for owner occupier and investor books. Debt to income is total debt across every lender, credit card limits included, over gross household income. On the file above, $800,000 of loan plus a $20,000 limit against a $160,000 household income is 5.1, comfortably inside. Push the loan to $1 million and it is 6.4, which does not mean no, but does mean competing for a limited quota. Bridging loans for owner occupiers and loans for the purchase or construction of new dwellings are exempt, and the cap does not currently apply to non-bank lenders.

What actually moves your number

In order of how much they move it, for the least effort. Reduce or close credit limits you do not use. Wait out the qualifying period on variable income rather than applying at month nine of a twelve month requirement. Get the documents right, because a missing income statement is often why a lender shades something it would otherwise accept in full. Then change lender, because the spread across a panel on one file is routinely larger than anything you can do to the file itself.

Investors have one more variable. Since May 2026 most major lenders stopped adding a negative gearing tax benefit back into assessable income on established purchases caught by the new rules, which cut investor capacity sharply. Our article on negative gearing and borrowing capacity sets out what moved and when, and buying your second, third and fourth property covers how rental shading and debt to income compound across a portfolio.

If you want the real number rather than the shape of it, that comes from running your documents against the lenders that suit your income type, which is what a first appointment is for. Have a look at our home loans page if you are buying to live in, first home buyers if it is your first purchase, or investment loans if the next one is an investment, then book a time and we will work out where your number actually sits.

Frequently asked questions

Written by Shane Heness

Owner and mortgage broker at LoanBuddy, Parramatta NSW. Eight years as a mortgage broker and a property investor since 2015. Credit Representative #528658 under Australian Credit Licence #389328.