Smart ways to work out what you can borrow after separation

Lenders don't look at what you could afford as a couple.

They assess you based on your current income, your current expenses, and your current commitments. If your separation settlement is finalised and you're applying on your own income, the calculation starts from scratch. If you're still mid-separation and some expenses are shared or uncertain, the picture gets more complicated.

How lenders calculate what you can borrow

Your borrowing capacity is the amount a lender will approve based on the gap between your income and your expenses, tested at an interest rate higher than the one you'll actually pay.

Lenders take your gross income, subtract tax using the ATO table, then subtract your living expenses and any ongoing debt repayments. What's left is your surplus, and that surplus needs to cover the loan repayment at a test rate that's currently 3.0 percentage points above the actual loan rate. That buffer is set by APRA and applies across all banks and credit unions.

Consider someone earning $95,000 a year with $2,400 in monthly expenses, $600 in credit card limits, and no other debt. At current variable rates, that person might be able to borrow around $520,000 to $560,000 depending on the lender's expense benchmarks and assessment policy. If that same person has $1,200 a month in child support payments going out, the borrowing capacity could drop by $200,000 or more.

The formula is consistent, but every lender applies it differently. Some use the expenses you declare, others use a household expenditure measure based on your income and dependents, and most apply whichever figure is higher.

Income that lenders will count

Base salary or wage income is straightforward. Overtime, bonuses, and commission are generally included if you can show at least 12 months of history, sometimes 24 months depending on the lender.

Child support and spousal maintenance that you receive can be included, but most lenders will only count it if there's a formal agreement in place and you can show evidence of consistent payment over at least three months. Some lenders will shade the income or apply it at 80 per cent rather than 100 per cent. If the payments are due to end within two years, some lenders won't count them at all.

Centrelink payments including Family Tax Benefit, Parenting Payment, and JobSeeker are treated as assessable income by most lenders, though policy varies. Some will include them in full, others will apply a reduction, and a few won't lend against them as a primary income source.

Rental income from an investment property is generally assessed at 80 per cent of the gross rent to account for vacancy, maintenance, and management costs. If you're keeping the investment property as part of the settlement and refinancing into your own name, that rental income can help your borrowing capacity, but the loan repayment on the investment property will also count as a commitment.

Expenses that reduce what you can borrow

Lenders assess your living expenses using either your declared costs or a benchmark figure called the Household Expenditure Measure, and they'll apply whichever is higher.

If you're renting while you look for a property to buy, that rent counts as an ongoing expense. If you're living with family temporarily and not paying rent, the lender will still apply a minimum living cost based on household size.

Child support and spousal maintenance that you pay are treated as ongoing commitments and reduce your borrowing capacity dollar for dollar. If the payment is temporary or due to end, you'll need to provide evidence of the end date, and most lenders will still include it in the assessment if it runs for more than six months from the application date.

Credit card limits are assessed as if you're making a repayment on the full limit, even if the balance is zero. A $10,000 limit might reduce your borrowing capacity by $50,000 or more depending on the lender. If you're not using the card, closing it before you apply makes a material difference to the outcome.

Buy now pay later accounts are treated the same way. Even if there's no balance, the fact that you have access to credit means the lender assumes you could use it, and that potential repayment reduces what you can borrow.

When your settlement isn't finalised yet

If you're applying for finance before your separation is legally settled, most lenders will still assess you, but they'll want to see evidence that the settlement is progressing and that you'll have clear title to any property or funds you're relying on.

If you're buying out your former partner and the current loan is in joint names, the lender will assess you on your sole income but will also want confirmation that your former partner will be released from the existing mortgage once the refinance settles. That release usually happens simultaneously, but it needs to be documented.

If you're receiving a cash settlement and using it as a deposit, the lender will want to see a signed separation agreement or consent orders showing the amount and the expected timing. If the funds haven't been released yet, some lenders will approve the loan conditionally and hold settlement until the funds are available. Others won't proceed until the money is in your account.

In our experience, applying before everything is finalised can work if the timeline is clear and the documentation is in place, but it adds steps and requires more coordination between your broker, your solicitor, and the lender.

How a broker helps you understand the numbers

Every lender has a different serviceability calculator, and every lender applies the income and expense rules differently.

Some lenders will accept 100 per cent of child support with a signed agreement, others will only take 80 per cent. Some will let you declare your living expenses if they're genuinely lower than the benchmark, others will override anything below their minimum. Some lenders assess rental income at 80 per cent, a few assess it at 75 per cent, and one or two will go higher if the property is in a strong location with low vacancy.

Running your scenario through one lender's calculator will give you one answer. Running it through five lenders might give you a $100,000 difference between the lowest and highest.

A broker who works with separating couples regularly will know which lenders are more flexible on maintenance income, which ones have lower expense benchmarks for single-income households, and which ones are more willing to work with applicants who are still finalising their settlement. That's not about finding a loophole, it's about matching your situation to the lender whose policy settings actually fit what you're dealing with. If you're self-employed or receiving income that doesn't show up on a payslip, the difference between lenders becomes even more pronounced, and working with someone who understands self-employed loans can give you access to options you wouldn't find on a comparison site.

Call one of our team or book an appointment at a time that works for you. We'll run your numbers, show you what you can borrow across multiple lenders, and walk you through the options that actually make sense for where you are right now.

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