Top tips to meet serviceability on one income

What does serviceability mean for a single-income buyer?

Serviceability is whether you can afford the repayments, not just whether you have a deposit. Lenders assess this by calculating your income minus your expenses, then testing whether you can still service the loan at a rate three percentage points higher than the actual rate you'd pay.

Consider a buyer earning $85,000 as a registered nurse working full-time at a Melbourne public hospital. She's saved a 10% deposit and wants to borrow around $500,000. The lender doesn't just look at whether she can afford repayments at the current rate. They add a 3% buffer to that rate and run the numbers again. If her living expenses, credit card limit, and other commitments push her too close to the edge at that higher test rate, the application fails before it starts.

That buffer exists because the Australian Prudential Regulation Authority requires it. Your broker can't remove it, and neither can the lender. But you can control the inputs that sit underneath it.

The uncommitted monthly credit limit problem

Lenders treat your credit card limit as a monthly expense, whether you use it or not. A $10,000 limit costs you roughly $300 per month in serviceability, even if the card sits at zero.

In our experience, single-income applicants often hold cards they no longer need. One was opened years ago for a holiday. Another came with a rewards program that hasn't been touched since. The limits add up, and each one reduces what you can borrow by around $35,000 to $40,000 depending on the lender and your income level.

If you're not using a card, close it before you apply for a home loan. If you need to keep one for genuine spending, ask the bank to reduce the limit to what you actually use each month. Lenders assess the limit, not the balance.

How buy now, pay later accounts affect what you can borrow

Buy now, pay later services like Afterpay, Zip, and Humm are treated as ongoing commitments by most lenders. Some assess them as a monthly expense based on your spending pattern over the past three to six months. Others apply a fixed monthly cost per active account, typically between $50 and $150.

If you've used these services occasionally but don't rely on them, close the accounts at least 30 days before lodging your application. Statements and account closures need time to flow through to your credit file and transaction history. Leaving them open can reduce your borrowing capacity by $15,000 to $25,000 per account, depending on the lender's policy and your usage.

Why rental income is discounted and how it still helps

If you're rentvesting or already own an investment property, lenders will include the rental income in your serviceability assessment. But they don't count 100% of it. Most lenders apply a shading rate of 80%, meaning they'll only credit $400 per week of a $500 per week rental.

That shading accounts for vacancy periods, maintenance costs, and property management fees. It's a fixed policy across most lenders, though a handful will shade at 75% instead. Even at 80%, rental income still improves your position if you're buying your next home on a single income, particularly if you're holding an investment loan with strong cash flow and plan to upgrade into an owner-occupied property.

Your broker can model how rental income flows through the assessment and whether switching to interest-only on the investment loan creates additional capacity without triggering a refinance.

What lenders count as genuine savings

Genuine savings means money you've accumulated over time, usually at least three months. Lenders want to see regular deposits into a savings account, offset account, or term deposit. A one-off gift, tax refund, or sale of assets won't qualify unless it's been sitting in your account and demonstrating a savings pattern.

If you're applying under the Australian Government 5% Deposit Scheme, this matters even more. Some participating lenders require genuine savings to make up the full 5% deposit, while others will accept a portion as gifted funds provided you can show a consistent track record of saving something each month.

A single-income buyer earning $75,000 and saving $400 per month has a stronger application than someone earning $90,000 who received a $20,000 gift last month but has no history of putting money aside. The pattern proves capacity, and capacity is what lenders are testing.

Fixed expenses you can't change and variable ones you can

Lenders split your expenses into two categories: committed and discretionary. Committed expenses include rent, loan repayments, insurance, childcare, and school fees. Discretionary expenses include groceries, entertainment, clothing, and transport.

You can't do much about committed expenses in the short term, but you can reduce discretionary spending in the lead-up to your application. Lenders calculate discretionary expenses using either your actual spending from bank statements or a benchmark figure called the Household Expenditure Measure, whichever is higher.

If your actual spending over the past three months is lower than the HEM, the lender will use your actual figure. That means cutting back on dining out, subscriptions, and non-essential purchases for 90 days before you apply can directly improve your borrowing capacity. It won't make a marginal application suddenly strong, but it can add $20,000 to $30,000 to what you're able to borrow if your spending has been high relative to your income.

How a guarantor can bridge the serviceability gap

A guarantor doesn't give you money. They use the equity in their own home as additional security, which allows you to borrow with a smaller deposit and avoid lenders mortgage insurance. But the guarantor structure also helps with serviceability in specific situations.

If a parent guarantees part of your loan, some lenders will assess the portion of the loan covered by the guarantee separately, applying slightly different serviceability tests. The guaranteed portion is secured against the parent's property, so the lender's risk is lower. That can create a path to approval where a standalone application on your income alone wouldn't succeed.

The guarantee is usually limited to 15% to 20% of the property value and can be removed once you've built enough equity to refinance without it. Your broker should structure the guarantee so it's released as soon as possible, typically within two to five years depending on your repayment strategy and property price growth.

Income verification for single-income applicants who are self-employed

If you're self-employed, lenders assess your income using tax returns, usually the most recent two years. They take your taxable income after deductions and add back certain non-cash expenses like depreciation. Some lenders will average the two years. Others will take the lower of the two if your income has dropped.

For self-employed borrowers, this creates a tension between minimising tax and maximising borrowing capacity. Every deduction you claim reduces your taxable income, which reduces what a lender will let you borrow. If you're planning to apply within the next 12 months, speak to your accountant about structuring your return to show slightly higher taxable income, even if it costs you more in tax this year.

Some lenders also offer low-doc or alternative income verification options for self-employed buyers. These rely on business activity statements, accountant's declarations, or bank statements instead of full tax returns. Rates are usually higher, and deposit requirements are stricter, but they can provide a path forward if your tax returns don't reflect your actual earning capacity.

Debt-to-income limits and what they mean from February 2026

From 1 February 2026, lenders can only write up to 20% of new owner-occupier loans to borrowers with a total debt-to-income ratio of six times or more. If you're borrowing $600,000 on an income of $90,000, your DTI is 6.7. That doesn't automatically disqualify you, but it does mean you're now competing for a limited portion of the lender's monthly quota.

If your DTI is sitting just above the six times threshold, even a small reduction in your loan amount or a modest increase in your income can move you back under it. Some lenders apply the DTI test strictly at six times. Others have set their own internal limits slightly lower to stay comfortably within APRA's 20% cap.

Your broker can calculate your DTI and identify which lenders are still approving applications in that range without delay. This is particularly relevant for single-income first home buyers in Melbourne, where median prices in many suburbs push borrowing amounts into DTI territory that wasn't an issue 12 months ago.

When splitting your loan improves serviceability assessment

A split loan means part of your borrowing is on a fixed rate and part is on a variable rate. Lenders assess each portion separately when calculating serviceability. Fixed-rate portions are tested at the fixed rate plus the 3% buffer. Variable-rate portions are tested at the variable rate plus the buffer.

If fixed rates are lower than variable rates at the time you apply, splitting your loan so that a larger portion sits on the fixed side can reduce the blended test rate and improve your assessed serviceability. The difference is usually small, but for a single-income buyer sitting right on the edge of what they can borrow, it can be the difference between conditional approval and a decline.

Your broker should model a split structure alongside a full variable option to see whether it opens up additional capacity without locking you into a rate you don't want.

Call one of our team or book an appointment at a time that works for you.

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