Borrowing Power Calculator

What is Borrowing Power?

Borrowing power is the maximum amount a bank will lend you for a home loan, based on your income, expenses, debts, and the lender's assessment criteria.

How this calculator works

Australian banks assess your capacity to repay using a serviceability buffer — typically the loan rate plus 3%. This means if the actual rate is 6.5%, they test whether you can afford repayments at 9.5%. The calculator estimates your maximum loan based on 30% of gross income allocated to repayments, minus existing debt commitments and living expenses. It then shows the maximum property price at different deposit levels (20%, 10%, 5%) and your debt-to-income ratio — a key metric banks use to assess risk.

The 3% Serviceability Buffer

Since 25 November 2021, APRA requires banks to assess loan applications at the actual rate PLUS a 3% buffer (up from 2.5% previously). So a 6.10% loan offer is stress-tested at 9.10%. Permanent prudential policy aimed at preventing widespread distress when rates rise. The buffer reduces maximum borrowing capacity by ~15-25% versus assessing at actual rate. Lenders like CBA and Westpac sometimes use slightly different buffer floors; check before assuming.

The Household Expenditure Measure (HEM)

HEM is a Melbourne Institute benchmark of household living costs by family composition and income band. Banks use the HIGHER of HEM or your declared expenses. HEM 2024 for a Sydney couple: ~$45k/yr (modest), ~$58k/yr (comfortable). After ASIC's 2018-19 enforcement, banks now verify expenses against 3 months of bank statements rather than accepting declared figures at face value.

Debt-to-Income (DTI) Ratio

Total household debt ÷ combined gross annual income. APRA flagged DTI > 6 as 'high risk' in late 2021 and many lenders apply soft caps at 6× or 7× DTI. Example: $150k combined income, soft cap ~$900k-$1.05M total debt (mortgage + credit cards + car loans + HECS). Two professionals on $100k each often have LOWER borrowing capacity than one $200k earner because they have two HECS debts, two cars, etc.

How Different Income Types Are Treated

BASE SALARY: 100% counted. OVERTIME: usually 80% counted (must be regular, 6-12 months history). COMMISSIONS/BONUSES: averaged over 1-2 years, often discounted. SELF-EMPLOYED INCOME: 2 years of tax returns + Notice of Assessment, averaged. INVESTMENT PROPERTY RENT: 70-80% (covers vacancy + costs). DIVIDENDS: usually 80%, must have 2+ years history. CENTRELINK: most banks only count Family Tax Benefit, Pension; not JobSeeker (treated as temporary).

How to Maximise Your Borrowing Power

(1) Pay off credit cards & close unused cards (banks count card LIMITS not balances as debt). (2) Reduce or pay off car loans before applying. (3) Get HECS-HELP paid down (if close to clearing). (4) Reduce expense items (entertainment, dining out) — banks SEE these in your statements. (5) Choose a longer loan term (30 yrs reduces stress-tested payment). (6) Get a guarantor (parent equity guarantee). (7) Compare lenders — borrowing capacity varies ~$50k-$150k between banks for same applicant.

First Home Buyer Schemes That Help

First Home Guarantee (Federal): 5% deposit, no LMI, government guarantees 15% — saves $10k-$20k LMI and dramatically increases buying power for first home buyers under income limits ($125k single / $200k couple). State FHOG: $10k-$30k cash grants for new builds. Stamp duty exemptions/concessions: NSW up to $800k, VIC up to $600k, QLD up to $700k — saves $15k-$35k in upfront costs.

All calculations are performed in your browser — your data never leaves your device. Results are for general guidance only and should not be considered professional financial advice.

Built and maintained by Konstantin Iakovlev. Data sourced from the ATO and official Australian government sources.