If you’ve spent any time looking at Sydney property prices lately, you already know the challenge. Median house prices across Greater Sydney are still sitting above $1.4 million, and even units in suburbs like Parramatta, Liverpool, or the Inner West are pushing $700,000 to $900,000. For a lot of buyers, the biggest frustration isn’t finding the right property — it’s discovering that the bank won’t lend them what they need to buy it.
Borrowing power is the maximum amount a lender is willing to loan you based on your income, expenses, debts, and a handful of other factors. But here’s the thing most people don’t realise: it’s not fixed. There are practical steps you can take right now to meaningfully increase what a bank will lend you — and in a market like Sydney’s, even an extra $50,000 to $100,000 in borrowing capacity can be the difference between settling for something and buying the property you actually want.
Why Borrowing Power Matters More in Sydney
In markets like regional Queensland or parts of Western Australia, a borrowing shortfall of $30,000 or $40,000 might mean looking one suburb over. In Sydney, it often means looking at a completely different type of property or a completely different part of the city. The stakes are higher, which is why understanding — and optimising — your borrowing capacity is worth taking seriously before you start making offers.
Lenders calculate borrowing capacity differently. The big four banks use different serviceability buffers and expense benchmarks, and some non-bank lenders apply more favourable assessments for certain borrower profiles. That’s worth keeping in mind as we go through the strategies below.
1. Pay Down or Close Unused Credit Cards and Loans
This is the most direct lever available to most borrowers. Every dollar of outstanding credit card limit — not balance, limit — reduces your borrowing power by roughly $3 to $5. A credit card with a $15,000 limit that you’ve never come close to maxing out is still cutting into your borrowing capacity significantly.
If you have multiple credit cards or personal loans, consider whether you can close unused cards, reduce limits, or consolidate before you apply for a home loan. A borrower who comes to us with two credit cards, a car loan, and a BNPL account will almost always have lower assessed borrowing power than someone with clean financials — even if they earn the same income.
The timing matters too. Lenders look at your credit file and current commitments at the time of application, so getting your debts sorted a few months before you apply is smarter than scrambling the week before.
2. Trim Your Living Expenses in the Months Before You Apply
Lenders in Australia are required to verify that your loan is “not unsuitable,” which in practice means they scrutinise your living expenses closely. Most banks use the Household Expenditure Measure (HEM) as a floor — they’ll use whichever is higher, your declared expenses or the HEM benchmark for your household size.
If your actual spending is higher than HEM (which it often is in Sydney, where costs are genuinely high), that eats into your serviceability. In the three to six months before applying, it’s worth being deliberate about your spending. Eating out less, pausing subscriptions you don’t use, and pulling back on discretionary spending won’t just look better on paper — banks will often request three to six months of bank statements and average your spending across them.
This isn’t about deceiving anyone. It’s about actually reducing your committed expenses so the numbers genuinely reflect your capacity to service a mortgage.
3. Save a Bigger Deposit
A larger deposit improves your position in two ways. First, it reduces your Loan-to-Value Ratio (LVR), which can unlock better interest rates and help you avoid Lenders Mortgage Insurance (LMI). LMI is typically required when you borrow more than 80% of the property’s value, and in Sydney, that premium can run to $15,000–$30,000 or more depending on loan size.
Second, some lenders apply more generous serviceability assessments to borrowers with lower LVRs, because the risk profile is better. If you’re sitting at 88% LVR and can find a way to get to 80%, it’s often worth the extra time to save — whether that means saving longer, using the First Home Super Saver Scheme (FHSS), or a family gift.
4. Add a Co-Borrower
If you’re applying solo, adding a co-borrower with stable income can significantly increase your assessed capacity. This is common for couples where one partner has been out of the workforce, or where one person’s income alone doesn’t quite get over the line for the property they want.
Keep in mind that adding a co-borrower also adds their debts and liabilities to the assessment, so it’s not always a straightforward win. It depends on their specific financial picture. A broker can model both scenarios — solo versus joint — and show you the actual difference before you decide.
5. Shop Across Multiple Lenders, Not Just Your Bank
This one surprises a lot of people. Two borrowers with identical incomes and expenses can get substantially different borrowing capacity assessments from different lenders — sometimes by $100,000 or more. This is because each bank has its own serviceability buffer, its own expense benchmarks, and its own treatment of things like rental income, overtime, bonuses, and self-employed earnings.
If your bank has told you what you can borrow, that’s your bank’s answer — not the market’s answer. A mortgage broker with access to a broad lender panel can identify which lender’s assessment criteria suit your situation best. For someone who’s self-employed, earns commissions, or has a non-standard income structure, the difference between lenders can be very significant.
6. Present Your Income Properly
How your income is documented and presented to a lender matters more than most people expect. If you’re an employee, getting a payslip that clearly shows your base salary, regular overtime, and any allowances will give a lender a complete picture. If you’ve recently received a pay rise, a letter from your employer confirming the new salary can help the lender use the higher figure rather than averaging your last six months.
For self-employed borrowers or those with multiple income streams — investment income, rental income, side businesses — the documentation requirements are more complex, and the way income is presented in your tax returns can significantly impact what a lender will use. Good advice from a broker or accountant before you apply can genuinely improve the outcome here.
What Kind of Difference Can You Actually Expect?
It depends on your starting position, but borrowers who implement several of these strategies in combination routinely see their assessed borrowing power increase by $50,000 to $200,000. For a household buying in Sydney’s middle ring suburbs — think Blacktown, Fairfield, Penrith, or Hornsby — that kind of improvement can genuinely open up properties that were previously out of reach.
Some of these changes take time to flow through. Paying off a credit card today won’t show up in your application next week. Lenders want to see a few months of clean statements in most cases. Starting six months before you plan to buy gives you the best chance to actually implement these strategies rather than just know about them.
Get a Real Assessment Before You Start Looking
One of the most common mistakes Sydney buyers make is falling in love with a property before they know what they can actually borrow. An accurate pre-assessment — not a rough online calculator, but a proper review by a broker who’s looked at your actual numbers — saves you the disappointment of missing out and gives you a clear target to work towards.
At Loan Connect, we work with Sydney buyers every week who come in thinking they can’t borrow enough, and leave with a clear plan and often a much stronger borrowing position than they expected. If you’re trying to figure out where you stand — or whether there are steps you can take to improve it — give us a call on 1300 855 155 or reach out through the website. We’ll give you a straight answer.
