Understanding Your Borrowing Power in 2025

Whether you’re a first home buyer or a homeowner looking to upgrade, understanding your borrowing power is key to making informed decisions when applying for a home loan in 2025. Your borrowing power directly impacts the type of property you can purchase and your loan approval success. 

As a trusted mortgage broker in Bathurst and mortgage broker in Lithgow, we help clients assess and improve their borrowing power to achieve their homeownership goals with confidence. 

What Is Borrowing Power? 

Borrowing power refers to how much a lender is willing to let you borrow for a home loan, based on your financial situation. It varies between lenders, and is influenced by multiple factors such as: 

• Your income 

• Your expenses and existing debts 

• Your credit history 

• Interest rates and lending policies 

• Your deposit amount 

• The loan term and structure 

How Is Borrowing Power Calculated? 

Lenders use a serviceability formula, comparing your income vs. expenses, while applying a buffer to ensure you can afford repayments if interest rates rise. 

Here’s what they typically assess: 

• Gross annual income (including salary, rental income, bonuses) 

  
  

• Monthly expenses (groceries, transport, lifestyle) 

  
  

• Existing loan repayments (credit cards, car loans, personal loans) 

  
  

• Number of dependents 

  
  

• Living expenses based on location 

  
  

• Current and expected interest rates 

 Tip: Borrowing capacity calculators online are only estimates. A mortgage broker can provide a tailored, lender-specific assessment. 

What’s Changed in 2025? 

In 2025, borrowing power is affected by: 

• Stricter lending rules in response to inflation and rate changes 

  
  

• Higher household expenses being factored in by lenders 

  
  

• A shift toward longer loan terms to help buyers manage affordability 

  
  

• Living cost assessments becoming more personalised 

That’s why it’s more important than ever to speak to a mortgage broker in Bathurst or mortgage broker in Lithgow to understand your position. 

How to Increase Your Borrowing Power 

1. Reduce Existing Debt 

Paying down personal loans, credit cards, or Afterpay accounts can significantly boost your borrowing power. Even unused credit cards can reduce how much you can borrow. 

Pro tip: Reduce credit card limits, even if you don’t use them. 

2. Minimise Your Living Expenses 

Cutting unnecessary expenses in the 3–6 months before applying can improve your bank statement profile and increase lender confidence. 

• Limit takeaway and subscriptions 

• Reduce discretionary spending 

• Review and consolidate bills 

3. Improve Your Credit Score 

A good credit history = higher trust from lenders. 

• Pay bills and loans on time 

• Avoid unnecessary credit enquiries 

• Check your credit report for accuracy 

4. Increase Your Deposit 

A larger deposit lowers the lender’s risk, which can increase how much you’re approved to borrow and reduce your Loan-to-Value Ratio (LVR). 

Did you know? Government schemes like the First Home Guarantee can help you buy with as little as 5% deposit without paying Lenders' Mortgage Insurance. 

5. Choose the Right Loan Structure 

Choosing a longer loan term or interest-only repayments (in some cases) can improve serviceability. 

A mortgage broker can help you structure your loan for maximum borrowing power and long-term benefits. 

6. Consolidate Your Debts 

Refinancing or consolidating high-interest debts into one manageable repayment can help you reduce monthly obligations, increasing your borrowing capacity. 

 Why Work with a Mortgage Broker? 

Every lender has different criteria, and comparing them yourself can be overwhelming. A mortgage broker in Bathurst or mortgage broker in Lithgow can: 

• Assess your financial profile 

• Calculate your accurate borrowing power across multiple lenders 

• Recommend strategies to increase it 

• Handle the application and negotiation process