The Five Pillars ofHome Loan Approval
Understanding what Australian lenders assess when evaluating your home loan application
Serviceability & Income
Lenders assess if you have enough surplus cash to handle repayments comfortably, even when interest rates rise.
Stress Test Buffer
Lenders apply a +2.5-3% buffer to current interest rates to ensure you can afford repayments even if rates increase significantly. For example, if the current rate is 4%, they'll test at 6.5-7%.
PAYG Employment Verification
Most lenders require 2-3 recent payslips and a Year-to-Date (YTD) summary from your employer to verify income consistency and confirm permanent employment status.
Self-Employed Income
Typically requires 2 full years of tax returns and Notices of Assessment (NOA). Lenders assess your net profit after business expenses to determine serviceability.
Additional Income Shading
Bonuses, overtime, rental income, and commissions are often 'shaded' by lenders—only 50-80% of these amounts count toward your borrowing capacity to account for variability.
If you're on probation, ask your employer for a letter confirming your 'permanent' employment status. Many lenders will accept this, significantly improving your application strength.