When you’re preparing to buy a home, one of the first things you might do is pay off your credit card balance. While that’s a smart financial move, many Australians don’t realise that it’s not just your balance that matters—it’s also your credit card limit. Even if your balance is zero, lenders still assess your total limit when determining how much you can borrow.

This oversight can significantly reduce your borrowing capacity and affect your chances of home loan approval. Why? Because banks and lenders don’t only look at your current debt, they evaluate how much debt you could access and factor that into your mortgage application as a financial liability. 

In this blog, we will discuss why limits matter more than balances, how they affect mortgage applications, and what steps you can take to improve your lending position. 

The Hidden Impact of Your Credit Card Limit

Paying off your credit card doesn’t mean lenders ignore it. In fact, they often treat your credit card limit as if it’s a fully drawn debt. If you have a $15,000 limit—even with a $0 balance—lenders may calculate 2–3% of that amount as a monthly repayment. Multiply that across several cards, and you could be viewed as having hundreds of dollars in recurring liabilities.

This is particularly important when applying for a home loan. Lenders use these calculated expenses to determine your borrowing capacity, which is how much they believe you can afford to repay on top of other financial commitments like rent, personal loans, or living expenses.

In short, a high credit card limit can undermine your financial strength on paper, even if your behaviour is responsible.

Still a bit confused? Check out this video—it clears up how your credit card limits can impact your loan approval.

How Credit Card Limits Affect Mortgage Applications

Here’s how it plays out when applying for a loan:

• Lower Borrowing Capacity: Unused credit still counts. Your total credit card limit could reduce how much you can borrow, even if your balance is $0.
  
• Inflated Monthly Expenses: Lenders assume a percentage of each limit as a liability, which skews your affordability and risks loan rejection.
  
• Missed Loan Opportunities: You might qualify for a better property or loan product if your borrowing capacity weren’t artificially reduced.
  
• Application Red Flags: Multiple cards with high limits can signal risk, raising red flags in your mortgage application, even if your credit history is clean.

Not sure what paperwork lenders need? Here’s a simple checklist of essential home loan documents to help you prepare for approval —it’s a must-read before you apply.

What You Can Do to Strengthen Your Borrowing Position

To maximise your borrowing capacity without damaging your credit score, here are a few practical tips:

• Cancel Unused Credit Cards: Cancel any credit cards you’re not using. Each one contributes to your overall credit card limit, regardless of balance. 

• Reduce Limits on Active Cards: Contact your bank and ask to reduce your existing limits. This small step can lead to a big increase in borrowing capacity. 

• Avoid Applying for New Credit: New credit enquiries can hurt your credit score and raise lender concerns during the mortgage application process. 
• Get a Pre-Assessment: Work with a broker or finance expert—like the team at Liveinvest Finance Solution—to review your financial profile and ensure your credit card limit isn’t quietly holding you back.

Want to show lenders you’re a low-risk applicant? See how submitting extra documents can support responsible lending and speed up your approval.

Final Thoughts

Paying off your cards might give you peace of mind, but when it comes to mortgages, it’s your credit card limit that can quietly sabotage your plans. In a competitive property market, especially in Australia’s major cities, every dollar of borrowing capacity counts. Understanding how credit card limits affect mortgage applications can make all the difference in securing the right loan and the right property.

At Liveinvest Finance Solution, we specialise in helping Australians strengthen their financial position so they can enter the property market with confidence. Whether you’re a first-time buyer or looking to upgrade, we’ll guide you through every step of the process—from financial clean-up to final approval.

Ready to strengthen your borrowing position before applying for a home loan?

Let Liveinvest Finance Solution help you borrow smarter. Contact our experts today.