In 2026, rising property prices and tighter lending rules mean many buyers are asking how to increase their borrowing capacity, especially in competitive markets like North Shore Sydney. Borrowing power isn’t just about income; lenders assess your existing debts, living expenses, credit history, and even the type of property you’re buying.

For home buyers looking to maximise what they can borrow, understanding how lenders calculate serviceability is critical. This is where experienced North Shore Sydney brokers - like Sabea Financial - can make a real difference. A local mortgage broker can review your financial position, identify policy-friendly lenders, and structure your application to improve your borrowing potential without overextending you.

Below, we outline proven strategies home buyers can use to increase borrowing capacity in 2026 and strengthen their position when applying for a home loan.

What is Borrowing Capacity and Why Does It Matter When Buying a Home?

Borrowing capacity is the amount a lender is willing to let you borrow for a home loan, based on your income, existing debts, living expenses, credit history, and current interest rates. It matters because it determines what price range you can realistically buy in and whether your loan application is likely to be approved. In higher-priced markets such as North Shore Sydney, borrowing capacity often becomes the key factor limiting property choice. 

Understanding your borrowing capacity early helps you set a realistic budget, avoid failed applications, and plan your purchase with confidence in 2026.

How Do Lenders Calculate Borrowing Capacity in Australia?

Before a lender confirms how much you can borrow, they run your finances through a detailed serviceability assessment. This process is designed to ensure your loan remains affordable even if interest rates rise or circumstances change.

Lenders calculate borrowing capacity by assessing:

• Income including salary, bonuses, overtime, rental income, and some government benefits, often with conservative shading applied
  
  
• Living expenses based on your declared costs and minimum benchmarks such as the Household Expenditure Measure
  
  
• Existing debts like credit cards, personal loans, car finance, HECS debts, and buy now pay later accounts
  
  
• Interest rate buffers applied above the actual loan rate to stress test affordability
  
  
• Household profile including dependants, marital status, and employment stability
  
  
• Loan structure and term which affects monthly repayment calculations

Because each lender applies these rules differently, working with an experienced mortgage broker helps you identify the most suitable lender and structure your application to maximise borrowing capacity responsibly.

9 Ways to Increase Borrowing Capacity

Improving borrowing capacity usually comes down to making targeted financial adjustments before you apply. Small changes made early can lead to a meaningful difference in how lenders assess your loan.

1. Reduce credit card limits

Lenders assume your full credit card limit is drawn, even if the balance is zero. Lowering limits can immediately improve serviceability.

2. Pay down personal and car loans

Ongoing repayments reduce how much you can borrow. Clearing or consolidating these debts can free up capacity.

3. Review and reduce living expenses

Lenders compare your expenses against benchmarks like the HEM. Demonstrating realistic and sustainable spending helps avoid inflated assessments.

4. Optimise your income structure

Ensuring bonuses, overtime, or allowances are documented correctly improves how income is assessed. Some lenders accept variable income more favourably than others.

5. Choose the right lender policy

Each lender applies serviceability rules differently. Selecting a lender aligned to your profile can significantly improve outcomes.

6. Extend the loan term where appropriate

A longer loan term reduces monthly repayments in serviceability calculations. This can increase borrowing power without increasing actual repayments initially.

7. Reduce existing financial commitments

HECS debts, buy now pay later accounts, and subscriptions all affect capacity. Even small liabilities can add up under assessment models.

8. Structure the loan strategically

Interest only periods or split loans may improve short term serviceability. These options must align with long term affordability.

9. Get broker advice before applying

A broker can assess your position, model lender outcomes, and guide next steps. This avoids unnecessary credit enquiries and missed opportunities.

With a clear strategy and professional guidance, these steps can be applied in the right order to improve approval outcomes while maintaining long term financial stability.

What Are Common Mistakes Borrowers Make When Trying to Increase Borrowing Capacity?

Many borrowers unknowingly reduce their borrowing capacity through avoidable missteps. These issues often arise before an application is even submitted. Common mistakes include:

• Relying on online calculators, which do not reflect real lender policies or current serviceability buffers
  
• Understating living expenses, triggering higher benchmark assessments or application scrutiny
  
• Keeping high unused credit card limits, which lenders still treat as active debt
  
• Applying with multiple lenders, leading to unnecessary credit enquiries and reduced options
  
• Ignoring small liabilities, such as buy now pay later accounts or subscriptions that affect serviceability
  
• Choosing the wrong lender, whose policy is not suited to the borrower’s income or property type
  
  

Avoiding these mistakes early and seeking professional guidance helps protect your borrowing position and sets up a smoother path toward approval.

How Mortgage Brokers Help Buyers in North Shore Sydney Increase Borrowing Power

Borrowing power is not just about numbers; it is about how those numbers are presented and assessed. This is where local expertise makes a measurable difference.

Mortgage brokers help by:

• Interpreting lender policies to match your income, expenses, and property type with the most suitable lenders
  
• Structuring applications strategically to improve serviceability and reduce approval risk
  
• Identifying capacity improvements early before credit enquiries or formal applications are lodged
  
• Managing lender communication to ensure assessments reflect your true financial position
  
  

With guidance from an experienced North Shore Sydney broker - like Sabea Financial - you gain a clear borrowing strategy that supports confident decisions and stronger loan outcomes.

FAQs

How much does credit card debt affect borrowing capacity?

Credit card limits can significantly reduce borrowing capacity because lenders assume the full limit is drawn. Reducing or closing cards often improves serviceability.

Can a pay rise immediately increase my borrowing capacity?

Yes, but most lenders require evidence such as payslips or a contract. Some may also require a minimum employment period.

Does having a guarantor increase borrowing capacity?

A guarantor can help with deposit requirements, but it does not always improve serviceability. Lender policies vary.

Do living expense benchmarks affect all borrowers?

Yes, lenders use benchmarks alongside declared expenses. If your expenses are below the benchmark, the higher figure usually applies.

Can refinancing improve my borrowing capacity?

Refinancing may help if you reduce interest rates or restructure debts. It does not automatically increase capacity without other changes.

Does rental income count fully toward borrowing capacity?

Most lenders shade rental income to allow for vacancies and costs. The percentage used differs by lender.

Is borrowing capacity the same as loan approval?

No, borrowing capacity is an assessment estimate. Final approval depends on property, valuation, and full credit assessment.

Final Thoughts

Improving your borrowing capacity in 2026 is about understanding how lenders assess income, expenses, debts, and risk, then making informed adjustments before you apply. Small changes made early can materially affect loan size, interest rates, and long term affordability outcomes. 

Professional advice helps you interpret policy changes, stress testing rules, and lender preferences that are not always visible online. Working with experienced North Shore Sydney mortgage brokers ensures your application is structured strategically, supported by evidence, and matched to the right lender. 

Sabea Financial provides personalised guidance, clear explanations, and practical solutions tailored to your circumstances. To take the next step with confidence, speak our team by calling us at 1300 001 755 to discuss your goals and options today for informed borrowing decisions and long term financial confidence.



External Resources

• https://www.moneysmart.gov.au/home-loans
• https://www.apra.gov.au
• https://www.servicesaustralia.gov.au