Your borrowing capacity varies with different lenders and is generally determined by your income making allowance for any ongoing liabilities (debts), dependants (children under the age of 18) and monthly living expenses. All banks have different rules around what income can be used and how existing liabilities need to be factored into your borrowing capacity. Your personal circumstance can mean that, depending on the policy of the lender, your borrowing capacity may be significantly greater with one bank compared to another. Banks also use an ‘assessment rate’ generally between 7 and 8 percent for home loans. This assessment rate is applied to the home loan you are applying for and works as a buffer taking into consideration any future interest rate rises that in the longer term are very likely.