How much can I actually borrow in 2026?
There is no single number — your borrowing power is whatever loan you can comfortably repay once a lender stress-tests your budget. Lenders start with your gross income, subtract your living expenses, existing debts (car loans, HECS-HELP, credit card limits) and the new repayment, then check that it still balances. As a working guide we see approvals land near five to six times gross household income, but a couple on the same income can get very different results depending on their expenses and debts.
Two levers dominate the maths in 2026: the interest rate your repayments are calculated on, and APRA's mandatory buffer on top of it. The RBA cash rate is 4.35%, after the Board left it unchanged at its most recent meeting — so variable home-loan rates, and therefore assessment rates, have held broadly steady rather than falling. Our borrowing power calculator is a quick way to get a ballpark before we run the real numbers with you.
Why does APRA's 3% serviceability buffer matter so much?
Because it is the single biggest reason your "affordable" repayment and your "assessed" repayment are so far apart. Lenders must assess your repayments at 3 percentage points above the loan's actual rate — a rule APRA confirmed it was keeping in mid-2025. So if your loan rate is 6.2%, the bank tests whether you could still cope at about 9.2%. This "serviceability buffer" (the safety margin built into the affordability test) is designed to protect you if rates rise.
In practice it can trim tens of thousands of dollars off the number you were hoping for. The trap we see most often is buyers budgeting on the advertised rate, getting excited about a price, then finding the bank's stressed figure lands well below it. Knowing the buffer exists lets you shop within a realistic range from day one.
What actually moves my borrowing power up or down?
Small changes to your financial profile move the needle more than most people expect. The main dials are:
- Credit card limits — lenders count the full limit as a liability, not your balance. A $15,000 card you never use can still cost you meaningful borrowing power.
- HECS-HELP and car loans — ongoing repayments reduce the income available to service a mortgage.
- Living expenses — lenders benchmark your declared spending; tidy, verifiable spending helps.
- Loan term and type — a 30-year principal-and-interest loan usually assesses more favourably than a shorter or interest-only structure.
- Income type — bonuses, overtime and self-employed income are treated cautiously. If your income is complex, our tips for self-employed borrowers are worth a read.
Because each lender scores these differently, the same applicant can be assessed for noticeably different amounts across banks — which is exactly where a broker earns their keep. It is imperative that you speak to a broker before going to your bank. Your own bank can only ever offer you its own product, assessed by its own rules; once it declines you, that enquiry sits on your credit file regardless.
Can a guarantor really boost how much I can borrow?
Yes — but it is important to understand how. With a family (or security) guarantee, a parent offers a portion of the equity in their own home as extra security for your loan. That lets you borrow up to 100% (sometimes more, to cover costs) of the purchase price and avoid Lenders Mortgage Insurance — the one-off premium, often $15,000 to $40,000-plus, that lenders charge when you borrow above 80% of a property's value.
The clearest way to see it is side by side. Take a $600,000 purchase in Victoria by a first home buyer — with a family guarantee, against going it alone with a 5% deposit and paying LMI:
| Family guarantee | 95% lend + LMI | |
|---|---|---|
| Deposit you need | $0 | $30,000 |
| Lenders Mortgage Insurance | $0 | ≈ $24,000 added to the loan |
| Amount you borrow | $600,000 | $594,000 $570k + LMI |
| Interest rate | 6.14% | 6.42% higher LVR pricing |
| Monthly repayment | $3,651 | $3,723 |
| Victorian stamp duty | $0 | $0 first home buyer exemption to $600k |
| What's at risk | A slice of your parents' home typically ~$150,000, capped by a limited guarantee | Only your own property |
Here is the nuance that catches people out: a guarantor mostly solves the deposit problem, not the income problem. Your own income still has to service the entire loan under APRA's 3% buffer. So a guarantee typically lets you buy sooner and buy a bit more (because you are not stopped by a small deposit or LMI), rather than magically multiplying your income-based capacity. For first-home buyers weighing this up, our first home buyers service page walks through the options in detail.
What are the risks of going guarantor — and who can be one?
The risks are real and sit largely with the guarantor, so this decision deserves honest family conversation. A guarantor is legally responsible for repaying the entire loan plus interest, fees and charges if the borrower can't, and a guarantor who offers their own home as security risks losing it if the loan isn't repaid.
Guarantors are usually parents, and increasingly they are retirees, which lenders scrutinise carefully. Before anyone signs, we insist the guarantor gets independent legal and financial advice, understands exactly how much of their equity is on the line (a limited guarantee caps the exposure), and knows when the guarantee can be released. The good news: once your loan drops to around 80% of the property's value — through repayments or price growth — you can generally apply to remove the guarantee entirely.
Guarantor or the First Home Guarantee — which lifts my buying power?
For many first-home buyers in 2026 there is a way to get in with a small deposit without putting a family member's home at risk. Under changes that took effect on 1 October 2025, the federal First Home Guarantee removed its place limits and income caps, so eligible buyers can purchase with as little as a 5% deposit and no LMI, with the government guaranteeing part of the loan. In Victoria the property price cap is $950,000 (per Housing Australia), and both schemes are subject to eligibility rules that change, so treat these figures as current at the time of writing and confirm with us.
Side by side at $940,000 — just under Victoria's $950,000 cap — the two paths are closer than most people expect, because neither pays LMI:
| First Home Guarantee (5%) | Family guarantee | |
|---|---|---|
| Deposit you need | $47,000 5% of the price | $0 parents' equity is the security |
| Lenders Mortgage Insurance | $0 government guarantees the gap | $0 No LMI due to additional security from parents |
| Amount you borrow | $893,000 95% of the price | $991,470 $940k price + duty & charges |
| Monthly repayment | $5,435 | $6,034 $599 more |
| Victorian stamp duty | $51,470 | $51,470 |
| Cash needed at settlement | $101,132 5% deposit + stamp duty & government fees | $0 rolled into the loan |
| What's at risk | Only your own property | A slice of your parents' home |
A guarantee still has its place — for buyers above the price caps, those who aren't eligible, or anyone wanting to avoid LMI on a larger purchase. In our experience the right answer comes from modelling both paths against your real numbers, not from a rule of thumb. That is a 30-minute conversation, and it is the best possible next step before you start making offers — book a strategy call below and we'll map out exactly how much you can borrow and whether a guarantee is worth it for you.
Frequently asked questions
How is my borrowing power calculated in 2026?
Lenders take your gross income, subtract living expenses, existing debts and commitments, then test whether you can still afford the repayments at your actual rate plus APRA's 3 percentage point buffer. Whatever loan amount passes that stressed test is your borrowing power.
Does a guarantor increase my income-based borrowing capacity?
Usually no. A family guarantee removes the deposit and Lenders Mortgage Insurance hurdle by adding your guarantor's property as extra security, but your own income still has to service the full loan under APRA's buffer. It lifts how much you can buy, not how much your income can support.
Can a guarantor be released from the loan later?
Yes. Once you have built enough equity — usually when your loan falls to around 80% of the property's value through repayments or price growth — you can apply to release the guarantee. The guarantor's property is then no longer tied to your loan.
Is it better to use a guarantor or the First Home Guarantee?
It depends. The federal First Home Guarantee lets eligible first home buyers purchase with a 5% deposit and no LMI without involving family, while a guarantor can support a smaller deposit or higher price above the scheme's caps. Many buyers weigh both; we model each side by side.
