The 5 to 6 times income rule gives you a starting point, but it is only a rough guide. It assumes a 20% deposit (so no Lenders Mortgage Insurance), no significant existing debts, and a standard two-person household. In practice, lenders calculate borrowing capacity using a serviceability formula - not a simple multiplier - which is why the same household income can produce very different borrowing capacity figures at different lenders.
For first home buyers, the multiplier can sometimes look lower in practice because HECS/HELP debt, credit cards and car loans eat into serviceability. For buyers with no debts and stable employment, it can stretch higher, particularly with smaller loan sizes where living expenses represent a smaller share of the assessment.
The multiplier also changes with interest rates. When rates are higher, the serviceability buffer (currently 3% above the actual rate) means you are assessed at a higher test rate, which compresses how much income is left to service a loan. This is why borrowing capacity has fallen for many households since 2022 even though their income has not changed.
Income gets you into the game, but debts determine whether you qualify. Every dollar of existing debt commitment reduces the income available to service a new home loan. Credit cards are treated particularly harshly - lenders assess the minimum repayment based on 3% of the credit limit, regardless of whether you pay the card off in full each month. A $20,000 credit card limit adds roughly $600 per month to your assessed commitments, reducing borrowing capacity by potentially $80,000 to $100,000.
HECS/HELP debt is deducted from gross income before serviceability is calculated. The repayment threshold is based on your taxable income and rises with earnings, so higher income earners can lose more borrowing capacity to HECS than they expect. Car loans and personal loan repayments are also deducted in full.
The practical implication: if your income is borderline, reducing debt before applying can have a bigger impact on your borrowing capacity than a pay rise. Cancelling unused credit cards is often the highest-leverage action a borrower can take in the 30 to 60 days before application.
Two incomes generally produce significantly more borrowing capacity than one, but not simply double. The reason is that lenders also count two sets of living expenses and apply household benchmarks that rise with household size. A couple assessed at $160,000 combined income does not necessarily borrow twice what a single person on $80,000 can borrow - but they will typically borrow 30% to 50% more.
The gap can be larger when the second income is full-time permanent employment with no debts. It can be smaller when the second income is casual, part-time or comes with its own debts (HECS, car loan). A broker can run the numbers for your specific situation across multiple lenders to identify whether combining both incomes actually helps or whether a single applicant structure serves you better in some circumstances.
If your income does not support the purchase price you need, there are several levers to pull. Reducing debts is the fastest way to increase capacity without changing income. Closing credit cards you do not need can unlock meaningful additional borrowing power within weeks.
Adding a guarantor - typically a parent using equity in their own property - can allow you to borrow more and avoid Lenders Mortgage Insurance without a larger deposit. It does carry risk for the guarantor if repayments are not met, so it is worth understanding the structure carefully before proceeding.
Different lenders also have genuinely different assessments of the same income. Some are more generous with overtime or rental income. Some apply lower living expense benchmarks. Choosing a lender whose model suits your income structure can add $50,000 to $150,000 in borrowing capacity in some cases. This is the core value a broker adds - we know which lenders suit which borrower profiles.
Jason and Steve are Adelaide mortgage brokers who give honest advice at no cost to you. No obligation.
The information on this page is general in nature and does not constitute financial advice. Given Finance Pty Ltd (t/a Lendology) ACN 624 144 501 is authorised under LMG Broker Services Pty Ltd ACL 517192.