The Lending Assessment System
Australian property lending decisions are assessed across five interdependent pillars.
Each pillar measures a different category of risk.
No pillar operates in isolation, and strength in one area does not override weakness in another.
The system is designed to contain risk, not to optimise outcomes for individual borrowers.
The Five Pillars
Equity & Deposit Framework
How lenders assess deposit size, equity buffers, leverage, and risk exposure at the start of a transaction.This pillar governs Loan-to-Value Ratios (LVRs), Lenders Mortgage Insurance (LMI), guarantor structures, and eligibility for government guarantee schemes.
→ View Equity & Deposit Framework
Income & Serviceability Assessment
How lenders assess whether repayments can be sustained under stressed conditions.
This pillar evaluates income reliability, expenses, existing liabilities, and assessment buffers — as well as lifestyle affordability and current cash flow.
→ View Income & Serviceability Assessment
Security Acceptability & Property Risk
How lenders assess the quality, liquidity, and recoverability of the property offered as security.
This pillar explains why property type, location, size, zoning, and usage materially affect lending outcomes.
→ View Security Acceptability & Property Risk
Entity, Debt Structuring & Tax Context
How ownership structures, entity types, and debt arrangements change which lending rules apply.
This pillar governs how income is recognised, whether equity can be accessed, and how loans can be exited or restructured over time.
→ View Entity, Debt Structuring & Tax Context
Regulatory & Transaction Context
How legal frameworks, timing rules, and execution requirements affect whether a transaction can complete successfully.
This pillar explains why approvals can lapse, settlements can fail, and interstate or complex purchases carry additional risk.
→ View Regulatory & Transaction Context
How the Pillars Work Together
The lending system evaluates all five pillars simultaneously.
For example:
- Weak equity tightens serviceability and security rules
- Complex structures narrow lender availability
- Poor execution or timing can negate strong credit outcomes
The system does not compensate for weakness — it layers constraints.
Why Outcomes Differ
Borrowers are often surprised when:
- higher income does not increase borrowing capacity
- similar properties receive different valuations
- approval does not guarantee settlement
- equity exists but cannot be accessed
These outcomes are not anomalies.
They are the result of how the system is designed to manage risk.
What This Site Is — and Is Not
Model Mortgages explains how Australian lending decisions are assessed in practice.
It does not:
- provide personal advice
- assess individual circumstances
- recommend strategies, lenders, or products
Understanding how the system works is different from having your own situation assessed.
How to Use This Site
- Use the pillar pages to understand how lending decisions are made
- Use the lending scenarios to see how the system is applied in practice
- Use the knowledge base to explore rules and concepts that recur across the system
Together, these pages form a reference framework for understanding how Australian property lending actually works.