“How much can I borrow?” is usually the very first question Perth buyers ask, and it is the right place to start. Your borrowing power sets the price range you can realistically shop in, shapes which suburbs are on the table, and helps you avoid the disappointment of falling in love with a home that sits just out of reach. The good news is that the way lenders work it out is not a mystery. Once you understand the moving parts, you can plan with confidence.
This guide walks through what actually determines your borrowing power, in plain English. If you would rather see a number first and read the detail after, try our borrowing-power calculator for a quick estimate, then come back here to understand what is driving the result.
What “borrowing power” really means
Borrowing power is a lender’s view of how much you can comfortably repay without financial stress. It is not the same as how much you want to spend, and it is not a fixed number across the market. Two lenders looking at the same household can land on figures that differ by tens of thousands of dollars, because each one weighs your income, expenses and debts slightly differently. That is exactly why working with a broker who can compare a network of 100-plus lenders matters.
Income (and how lenders shade it)
Income is the engine of borrowing power, but not all income is treated equally.
- Base salary (PAYG) is usually accepted in full. PAYG means pay-as-you-go, the standard way employees are taxed at the source.
- Bonus and overtime are often “shaded”, meaning the lender counts only a portion (commonly 50 to 80 per cent) because this income can vary year to year.
- Self-employed income is typically assessed on your last one to two years of tax returns, and lenders may average the figures or take the lower year to be conservative.
- Rental income, government payments and investment income are each treated under their own rules, and some are also shaded.
If your income is lumpy or you run your own business, do not assume you will be penalised. Different lenders have very different appetites, and a good broker knows which ones look favourably on your situation.
Living expenses: HEM and your declared spending
Lenders subtract your living costs from your income to see what is left over for repayments. They look at two numbers and use the higher of the two.
- Your declared expenses, which you provide based on your real spending.
- HEM (the Household Expenditure Measure, the standard cost-of-living baseline lenders use). As at June 2026 (please confirm current figures), HEM sits at roughly $2,200 per month for two adults, plus about $600 for each dependant.
So if you declare lower expenses than HEM suggests, the lender will generally apply the higher HEM figure anyway. The practical takeaway: tidying up discretionary spending in the months before you apply genuinely helps, and being honest and accurate on your application avoids surprises later.
Existing debts and commitments
Every ongoing financial commitment reduces your borrowing power, including:
- Car loans and personal loans (the monthly repayment is counted).
- Buy-now-pay-later accounts.
- HECS or HELP study debts.
- Credit card limits. Lenders usually count a percentage of your total limit, not your balance, so a barely-used $15,000 card can still trim what you can borrow.
Closing or reducing unused credit cards and clearing small debts before applying is one of the simplest ways to lift your number.
The APRA serviceability buffer
Here is a detail that surprises many buyers. Lenders do not assess your repayments at the interest rate you will actually pay. They add a safety margin on top.
As at June 2026 (please confirm current figures), lenders assess your repayments at your actual interest rate plus a 3 per cent buffer set by APRA (the Australian Prudential Regulation Authority, the banking regulator). So if your real rate were 6 per cent, the lender would test whether you could still afford repayments at around 9 per cent. This buffer exists to make sure you can cope if rates rise, and it is a big reason your approved amount can feel lower than you expected.
Ready to see where you stand with the buffer applied? find a Perth broker who can run real lender scenarios for you.
LVR, LMI and your deposit
LVR (loan-to-value ratio) is the size of your loan compared with the property value. Borrow $640,000 against an $800,000 home and your LVR is 80 per cent.
This matters because of LMI (lenders mortgage insurance, the one-off insurance payable when you borrow more than 80 per cent of the property value). As at June 2026 (please confirm current figures), LMI generally applies once your LVR goes above 80 per cent. LMI protects the lender, not you, and it can add thousands to your costs, though it can also let you buy sooner with a smaller deposit.
A larger deposit lowers your LVR, can remove LMI, and often unlocks sharper interest rates. First home buyers in WA should also check whether grants or scheme places could boost their deposit position. Our WA first home buyer grants and schemes guide covers what is available locally.
DTI: the debt-to-income ratio
DTI (debt-to-income ratio) compares your total debt with your total income. If you earn $120,000 and want to borrow $720,000 in total debt, your DTI is 6x.
As at June 2026 (please confirm current figures), some lenders cap DTI at around 6x, while others stretch to 7x. A higher cap can mean a higher borrowing limit, which is another reason lender choice matters so much. If one lender’s DTI ceiling is holding you back, another may have room.
Loan term
A longer loan term lowers the assessed monthly repayment, which can lift your borrowing power. Most home loans run on a 30-year P&I (principal and interest) basis, where each repayment chips away at both the amount borrowed and the interest. Stretching the term reduces monthly pressure but increases total interest paid over the life of the loan, so it is a balance worth discussing with a broker.
A worked example (clearly hypothetical)
Let us tie it together. The figures below are illustrative only and not a quote.
Meet “Jordan and Sam”, a hypothetical Perth couple with no children:
- Combined base income: $140,000 (PAYG, accepted in full).
- Sam’s annual bonus: $10,000, shaded to 50 per cent, so $5,000 counts.
- Assessed income: $145,000.
- Living expenses: they declare $3,000 per month, which is above the roughly $2,200 HEM baseline for two adults, so the lender uses their higher declared figure.
- Existing debts: a car loan at $450 per month, plus a $10,000 credit card limit.
- They have a 15 per cent deposit, so their LVR would sit above 80 per cent, meaning LMI applies.
When the lender runs the numbers, it tests their repayments at their actual rate plus the 3 per cent APRA buffer, subtracts their living expenses and debt commitments, and checks the result against its DTI cap. Because their LVR is above 80 per cent, LMI is added to the cost. The shaded bonus, the credit card limit and the buffer all pull the final figure down from what a simple “income times five” guess might suggest.
The point is not the exact dollar amount. It is that small changes (closing that credit card, lifting the deposit above 20 per cent, or choosing a lender with a 7x DTI cap) can each shift the result. A broker models these scenarios for you so you can see the trade-offs clearly.
How long does it all take?
For a clean PAYG profile with straightforward income and a tidy expense history, standard pre-approval takes about 5 business days as at June 2026 (please confirm current timeframes). More complex situations, such as self-employment, can take a little longer, but they are very much workable with the right lender.
Bringing it together
Your borrowing power is the sum of income (sometimes shaded), expenses (HEM or declared, whichever is higher), existing debts, the APRA buffer, LVR and LMI, DTI, your deposit and your loan term. No single lender’s view is the final word, which is genuinely reassuring: if one says no, another may well say yes.
If you are weighing up an investment purchase as well, our Perth investment property loan guide explains how the numbers differ. And whenever you are ready for a tailored estimate, start with the borrowing-power calculator or speak with an accredited Perth broker from independent brokers. Licensed mortgage brokers provide support for your circumstances.
Last updated 2026-06-26.
This information is general in nature and does not take into account your personal circumstances, objectives or needs. It is not financial or credit advice. Figures are current as at June 2026 and may change. Seek independent advice before acting. Perth Home Loan Broker is an enquiry website; licensed mortgage brokers provide all credit advice under the National Consumer Credit Protection Act 2009.