What can quietly reduce your borrowing power?
To put some numbers around it, assume a $750,000, 30-year loan and a lender assessment rate of (6.2%) 9.2%. These are rough illustrations; your result will depend on income, expenses, loan terms and lender policy.
$10,000 credit card limit: The full limit is counted in servicing, even if the card has no balance. At an assessed repayment of 3% a month, that’s $300 a month, which is roughly equivalent to $37,000 less borrowing capacity. Reducing the limit or closing a card you no longer need can improve your borrowing capacity.
$30,000 car loan: The lender counts the required repayment, not just the balance. If the repayment is about $600 a month, that’s roughly equivalent to $73,000 less borrowing capacity. The actual repayment depends on the rate and time left on the loan.
A dependant: There isn’t a standard dollar deduction for each child. As an illustration, if the lender’s expense assessment rises by $500 a month, that could mean roughly $61,000 less borrowing capacity.
Each 0.25% increase in the assessed home loan rate: On these assumptions, the maximum loan falls by roughly $16,000. The actual repayment on a $750,000 loan would also rise, but the borrowing capacity change depends on the lender’s calculator.
Property ownership and loan structure matter too. A trust or SPV doesn’t automatically remove a debt from servicing; the lender may consider the entity’s obligations and any guarantees.
APRA’s guidance describes assessing revolving credit commitments at 3% of the limit per month as one approach, and the standard mortgage serviceability buffer is currently 3 percentage points. These examples use that 3% card assumption and a 30-year loan assessed at 9.2%.