“Self-employed borrowers are assessed on the same capacity framework as PAYG employees. The difference is which income figure the lender will accept, not the ceiling itself.” [cite: 832]
The borrowing capacity of a self-employed borrower is calculated using the same APRA serviceability model as any other applicant: assessable income minus living expenses and existing liabilities, stress-tested at the contract rate plus 3%. [cite: 833] The key variable is what income figure the lender accepts. [cite: 834]
The add-back question
Taxable income for self-employed borrowers is often lower than actual cash available for repayments, because legitimate deductions such as depreciation, business vehicle costs, and home office expenses reduce the reported figure without reducing actual income. [cite: 836] Some lenders add back certain non-cash deductions to the taxable income figure, materially improving the capacity calculation. [cite: 837] Knowing which lenders apply which add-backs is a significant advantage. [cite: 838]
Full-doc versus alt-doc capacity
Full-doc applications with two years of consistent returns produce the highest capacity and the most competitive rates. [cite: 842] Alt-doc applications, where income is declared and supported by BAS rather than tax returns, may produce a lower assessed capacity at some lenders and carry a modest rate premium. [cite: 843]
Non-bank lenders and the DTI cap
From February 2026, the APRA DTI cap limits how many high-DTI loans major banks can issue per quarter. [cite: 845] Self-employed borrowers with higher income-to-debt ratios may find non-bank lenders, who are not subject to this cap, provide better outcomes than major banks. [cite: 846]
You may consider seeking independent advice from a licensed mortgage broker or financial professional to assess your personal circumstances. [cite: 847] This is general information only. This information is general in nature and does not take into account your objectives, financial situation or needs. [cite: 848] Borrowing capacity for self-employed borrowers depends on individual income structure, liabilities, and lender policies. [cite: 849] Speak with a licensed mortgage broker for an assessment across multiple lenders. All loans are subject to lender approval. [cite: 850]
Sources: Lagos Financial, Self-Employed Home Loans 2026; Sandcastle Finance, APRA DTI Cap 2026; ALIC, Understanding Borrowing Power 2026; [cite: 851] myfundfinder.com.au, Self-Employed Home Loans 2026. [cite: 852]
