Her borrowing power fell by $100,000. The debts most buyers forget to count

A 34-year-old new migrant mother thought the hard part was saving a deposit. Then a lender’s assessment showed that three ordinary debts had reduced her borrowing power by almost $100,000.

She had no missed repayments. Her income was steady. The debts were not dramatic: a car loan, a credit-card limit she rarely used and a student repayment still attached to her income. In her mind, they were manageable monthly bills. In a lender’s model, they were competing claims on every future pay packet.

Her question was blunt: “If I can afford the repayments, why does the bank say I cannot afford the house?”

The answer is not just the rate

Home-loan assessment is built around a borrower’s capacity to keep paying if conditions become harder. That means the lender does not simply compare today’s income with today’s proposed mortgage repayment. It looks at existing commitments, living expenses, dependants, the loan term, interest-rate assumptions and the size of unused facilities that could be drawn later.

That is why two people with the same salary and deposit can receive materially different borrowing limits. Their balance sheets are not the same, even when their bank statements look comfortable month to month.

A credit-card limit is a classic example. A borrower may owe nothing, but the unused limit can still be treated as a potential commitment. Closing or reducing a card may change the assessment, although it also removes an emergency buffer. The correct question is not “Can I get rid of this before settlement?” It is “What does this commitment do to my resilience, and what will the lender count when I apply?”

Car finance can have an even more visible effect because the scheduled repayment runs alongside the proposed mortgage. A modest monthly commitment, multiplied across the assessment period, can remove a surprisingly large amount of headline borrowing capacity. Buy-now-pay-later accounts and personal loans can be small in isolation but important when several are present together.

Income-linked repayments can also be misunderstood. A student-debt repayment may not look like a conventional loan statement, but if it reduces take-home income, it can affect the surplus available for housing costs. The same principle applies to childcare, private school fees, support for family members and regular transfers that a borrower regards as temporary.

The $100,000 figure is therefore not a universal penalty. It is a warning about the gap between a rough online borrowing estimate and the lender’s complete assessment of one household. The result depends on income, dependants, debts, limits, expenses, lender policy and the proposed property.

Why the property still matters

It is tempting to treat finance as a personal spreadsheet and the property as a separate decision. That is a mistake. Borrowing capacity only matters in relation to an asset that can carry its debt, attract future buyers and remain useful if the plan changes.

RHA’s street-level data is designed to test that distinction. Two homes can sit in the same suburb, share the same suburb median and appear similar on a broad market screen, yet produce very different investment outcomes. At the exact-address level, achieved rent, vacancy, days on market, applicant depth and buyer depth can expose whether the cheaper property is genuinely cheaper or simply harder to hold and resell.

The supply pipeline matters too. A home surrounded by near-term competing stock may face a different rental and resale test from one on a street with stable demand, even when both are described by the same suburb label. That is why reducing a debt to borrow more is only sensible when the property itself has been tested against the street, not just the postcode.

The address can also affect the lender’s valuation. A borrower who stretches to the top of an approval range may discover that a valuation does not support the contract price. A loan can be “approved” in principle while the specific security still determines how much cash is required to complete.

What should a buyer check before applying?

First, list every commitment and every limit. Include credit cards, personal loans, car finance, education-linked repayments, buy-now-pay-later accounts, guarantees and recurring commitments that may appear in transaction data. Do not assume an unused facility is invisible.

Second, separate borrowing capacity from repayment comfort. A lender’s maximum is not a target. Keep room for rate changes, repairs, vacancy, insurance, childcare and the ordinary surprises that arrive after settlement.

Third, test more than one lender pathway. Policies differ in how they treat particular income types, debts, dependants and expenses. A different assessment is not automatically a better assessment; it may simply make different assumptions. The goal is durable finance, not the biggest number on a pre-approval letter.

Fourth, match the loan to an asset with evidence behind it. The property should have a plausible rent, depth of tenant demand, realistic days on market and a resale audience. Our guide to why a cheaper mortgage can still fail the first test explains why the headline rate is only one part of the decision. For investors, the borrowing-power gap created by serviceability assumptions is another useful reminder that policy can move the result before the property changes.

Finally, review the application before making a large purchase or opening a new facility. A new debt taken on during a property search can change the numbers at exactly the wrong time. If the household’s position has changed, update the assessment rather than hoping an old estimate still applies.

The new migrant mother did not need a more exciting loan. She needed to understand what the lender could see, then choose an asset that remained defensible after the debt test. That is the opportunity in a tighter borrowing environment: the right property, on the right street, supported by real rent and demand data, can build a stronger investment plan than a larger approval ever could.