The short answer
- Every bank follows the same basic rules, including testing your loan at least 3% above its rate. Everything else is set by each lender's own policy.
- The biggest differences are in how much of your income counts, how expenses and debts are assessed, and which properties and borrowers they'll lend to.
- The same person can get a very different borrowing figure, or a different answer, from two lenders.
- Choosing the right lender before you apply saves time and avoids extra credit enquiries on your file.
What every lender has in common
Banks and other deposit-taking lenders are regulated by APRA. They must:
- test whether you could afford the loan at at least 3 percentage points above its interest rate
- make reasonable enquiries about your income and expenses, rather than relying on a benchmark alone
- stay within APRA's limit on lending to borrowers with high debt compared with income.
Beyond that, APRA sets principles rather than detailed rules, so each lender writes its own credit policy. Source: APRA Non-bank lenders aren't covered by APRA's buffer rule. They set their own tests, but must still lend responsibly.
1. How much of your income counts
Base salary usually counts in full. Other income is where lenders differ most.
- Overtime, bonuses and allowances. APRA's guidance is that banks should discount less certain income like this by at least 20%. Lenders then differ on how much history they want, from a few months to two years, and on which types they accept. Source: APRA
- Casual and contract work. Many lenders want 6 to 12 months of steady history. Some accept less if you've worked in the same industry for longer. Source: Mozo
- New jobs and probation. Some lenders will lend while you're on probation, especially if you've stayed in the same line of work. Others wait until it ends.
- Self-employed income. Lenders differ on how many years of tax returns they need and how they treat add-backs. Our self-employed guide covers this in detail.
- Government payments. Some lenders count family tax benefits and other regular payments. Others count them only in part, or not at all.
Here's how one of those differences can play out. Sam earns $85,000 a year plus $20,000 in overtime, and has 6 months of overtime history in a new job.
| Income | Lender A: needs 12 months' overtime history | Lender B: accepts 6 months, counts 80% |
|---|---|---|
| Base salary | $85,000 | $85,000 |
| Overtime | $0 | $16,000 |
| Income counted | $85,000 | $101,000 |
Example only. Lenders A and B are hypothetical. After 2026–27 tax, the extra $16,000 is about $907 a month. Tested at 9.5% over 30 years, that could support up to about $108,000 more borrowing, before any change to the expense benchmark.
2. Rental income and other home loans
Lenders usually count around 80% of the rent, to allow for vacancies and costs, though some count less. Source: Mozo For a property you're buying, most accept a rental appraisal from a real estate agent. Short-stay income, like Airbnb, is a bigger split: some lenders don't count it, and others want a track record first.
For investors, how a lender assesses your existing home loans matters just as much. Lenders differ on the rate and remaining term they assume for loans you hold with other banks, and with several properties that alone can change the result a lot. See our investment loans guide.
3. Living expenses
Lenders compare the expenses you declare with a benchmark for similar households, often the Household Expenditure Measure (HEM), and use whichever is higher. APRA says benchmarks can't replace proper enquiries, so lenders also look at your bank statements. Source: APRA Where they differ:
- which benchmark they use, and how it's adjusted for income, location and dependants
- how closely they read your statements, and how many months they ask for
- which costs they leave out because they'll stop, such as the rent you won't pay once you've bought.
4. Debts and card limits
- Credit cards are assessed on the limit, not the balance, usually as a monthly repayment of around 3% to 3.8% of the limit. Source: Mozo
- HECS-HELP no longer counts towards APRA's debt-to-income measure, and some lenders may set the repayments aside if you're close to paying the debt off. More in how HECS debt affects home loans.
- Buy now pay later and car loans are treated differently too, especially accounts with small balances or loans that are nearly paid off.
5. Debt-to-income limits
Since 1 February 2026, banks can make no more than 20% of their new lending to borrowers whose total debt is six or more times their income. The limit applies separately to owner-occupier and investor loans, and loans to buy or build a new home are exempt. Source: APRA
Each bank decides how to use that allowance and sets its own maximum. One lender may stop at six times your income, while another goes further for a strong application.
6. The property you're buying
- Small apartments. Many lenders have a minimum size, or want a bigger deposit for studios and small units.
- High-density buildings and some postcodes. Lenders may limit how much of the value they'll lend.
- Rural and large blocks. Some lenders limit the land size, or count only part of the land's value.
- Valuations. Lenders use different valuers, and the figures can differ. A lower valuation can mean a bigger deposit or lenders mortgage insurance.
7. Credit history, LMI and refinancing
- Credit history. A late payment or default rules you out with some lenders but not others. Specialist lenders may help, usually at a higher rate.
- Lenders mortgage insurance. Some lenders waive or reduce LMI for eligible professions, such as some medical, legal and accounting professionals.
- Refinancing. APRA lets banks make exceptions to their usual tests, and for borrowers refinancing they can consider how well you've kept up repayments. Exceptions are less than 5% of new lending, so this varies a lot between lenders. Source: APRA
Where to start
| Your situation | What to look for in a lender |
|---|---|
| Overtime, shift or bonus income | Counts more of it, with a shorter track record |
| Casual, contract or new job | Accepts a shorter history, or applicants on probation |
| Investor with rental income | How much rent it counts, and how it assesses your other loans |
| Self-employed | How many years of financials it needs, and low-doc options |
| Small apartment or rural block | Comfortable with the property type, size and location |
| Past credit issues | Looks at the reason, the amount and how long ago it was |
| Refinancing on a tight budget | Takes your repayment history into account |
How to apply without hurting your chances
- Check lender policy before you apply, not after a decline.
- Apply to one lender at a time. Each application usually adds a credit enquiry to your file, and several in a short time can make lenders cautious.
- Have the right paperwork ready, such as recent payslips, an employer letter if you rely on overtime or allowances, and a lease or rental appraisal for rental income.
- Lower credit card limits you don't need before you apply.
This is the part we do for you. Before we lodge anything, we check your situation against the policies of 40+ lenders, so your first application goes to one that fits. Our borrowing power article explains the general rules behind the numbers.
Information is general and correct as at October 2026. Lender policies change often, so get advice on your own situation.