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How Australian Lending Is Assessed: A 5-Minute Overview
Australian lending decisions are not made using a single rule, calculator, or benchmark.
They are assessed through a structured system that evaluates multiple dimensions of risk at the same time. As a result, borrowers with similar incomes, deposits, and credit histories can receive different outcomes — without any error having occurred.
This page provides a short overview of how that system works and how to use this site.
The Foundation: The Four Cs of Credit
The four Cs of credit — Capacity, Character, Collateral, and Capital — are the correct and foundational framework for understanding lending risk.
They describe the core factors lenders assess when considering a loan.
Where confusion often arises is not in the framework itself, but in how these factors are interpreted, weighted, and constrained in practice by policy, structure, property risk, and transaction context.
This site explains how the four Cs are applied in real lending decisions.
Lending Is a System, Not a Formula
Australian lending decisions are made within a risk-containment system.
That system does not optimise outcomes for individual borrowers. Instead, it assesses whether a proposed loan fits within current policy, risk appetite, and regulatory constraints.
Risk is layered, not averaged.
Strength in one area does not override weakness in another.
The Assessment Pillars
In practice, lending decisions are assessed across five interdependent pillars.
Each pillar measures a different category of risk, and no pillar operates in isolation.
These pillars explain why:
- income may be treated differently between borrowers
- borrowing capacity can change without income changing
- similar properties can receive different outcomes
- approvals may not always proceed to settlement
Why Outcomes Differ
Borrowers are often surprised when:
- higher income does not increase borrowing capacity
- equity exists but cannot be accessed
- similar properties receive different valuations
- approval does not guarantee settlement
These outcomes are not anomalies.
They are the result of how the system is designed to manage risk.
How Scenarios Change Outcomes
Borrower scenarios do not change the system — they change how the system is applied.
Different scenarios affect which risks are prioritised, constrained, or excluded.
Examples include:
- first home buyers
- property investors
- rentvesting and interstate buying
- Australian expats
- SMSF property
- specialist or high-value property
Cross-Cutting Concepts
Certain concepts recur across multiple pillars and scenarios and are frequently misunderstood or oversimplified.
These concepts explain why outcomes can differ even when the numbers appear similar.
How to Use This Site
Use Model Mortgages to:
- understand why a particular outcome occurred
- fact-check advice or assumptions
- learn how lenders assess risk in practice
- ask better, more informed questions
This site is designed as a reference framework, not a step-by-step guide.
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 lenders, products, or strategies
Understanding how the system works is different from having your own situation assessed.
General information only. No personal advice is provided.
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