Borrowing power is not only “income × a multiplier.” Every liability that counts as debt uses up room under debt-to-income settings and under the bank's own serviceability model. The surprises are usually limits, not balances.
Credit cards: the limit matters
Banks typically count the full credit limit, even if you pay the card to zero every month. A $10,000 limit you never use can still reduce capacity by about $10,000 under a simple DTI lens — and it can weigh on serviceability too. Closing or lowering unused limits before you apply is one of the few quick levers buyers control.
Student loans
The remaining student loan balance is debt for assessment purposes. Compulsory repayments also affect how much free cashflow the bank thinks you have. Both the balance and the repayment matter; neither is ignored because the loan came from study.
Car loans, personal loans and hire purchase
These are straightforward: outstanding balances reduce capacity, and their repayments reduce serviceability. Clearing a small personal loan before applying can move the needle more than people expect, because it frees both debt room and monthly cashflow.
Interest-free hire purchase deserves a mention because the marketing invites you to discount it. A twenty-four month interest-free arrangement on furniture is still a fixed monthly commitment you are contractually obliged to meet, and the lender assesses it as one. That the finance company charges you nothing for the privilege makes no difference to whether you can also afford a mortgage payment.
Why limits count rather than balances
Borrowers find the credit-limit rule the most irritating part of the process, so it is worth knowing the reasoning. The bank is not assessing what you owe today; it is assessing what you could owe tomorrow without asking anyone's permission. An unused limit is a facility you can draw down in full the day after settlement, when the mortgage is already advanced and the lender has no further say. Assessing the limit rather than the balance is the only way to account for that. Understanding this also tells you the remedy: reducing the limit works, paying the balance to zero does not.
What generally does not count
Regular living expenses — rent, groceries, power, insurance — are not debt, though they are assessed separately under serviceability, so they still shape the outcome. Debts held entirely by someone else, where you are neither a borrower nor a guarantor, are not yours. A student loan that is fully repaid stops counting once the record catches up, which is worth confirming rather than assuming. And a mortgage on a property you are selling before settlement can usually be excluded, provided the sale is unconditional and the lender can see it.
Buy-now-pay-later and overdrafts
Treatment varies by lender, but it is unsafe to assume informal short-term credit is invisible. If it appears on your credit file or statements, be ready for questions.
Buy-now-pay-later is worth singling out because borrowers routinely leave it off an application, reasoning that it is not really a loan. The bank is not primarily worried about the balance, which is usually small. It is reading the pattern. Regular instalment payments for everyday purchases suggest a household whose income does not comfortably cover its spending, and that inference does more damage to an application than the dollar figure ever would. An overdraft is treated much the same way as a credit card: the arranged limit is the exposure, whether or not you are in it today.
Guarantees and debts that are not yours
If you have guaranteed someone else's borrowing — a family member's loan, a business facility, a lease — that contingent liability can be assessed as though it were your own, because in the circumstances that matter it becomes your own. The same applies to a former joint loan you have separated from but never formally been released from. Being off the property title is not the same as being off the mortgage, and lenders check the latter.
Timing matters as much as the amounts
Closing a credit card helps, but only once the closure is processed and reported, which is not instant. Credit enquiries also leave a mark: applying to several lenders in quick succession can read as someone shopping under pressure. The orderly sequence is to tidy limits and clear small balances first, allow a few weeks for records to catch up, and only then approach lenders. Reversing that order can undo the benefit of the tidy-up entirely.
How to use the borrowing calculator
Enter debts and card limits honestly. Compare the range before and after lowering a card limit in the inputs — that experiment is often more educational than another hour of rate shopping. The Reserve Bank owner-occupier DTI reference point is 6×, with banks allowed to write a limited share of lending above the threshold; your bank's own test may bind first.