Borrowing Power Calculator Australia

How borrowing power is worked out

Borrowing power comes down to one number: your monthly surplus. A lender takes your net income, subtracts your living expenses, and subtracts the repayments on any existing debts. Whatever is left over is what can go towards a home loan. From that surplus, the lender works backwards with the amortisation formula to find the largest loan the repayment can cover. This calculator follows the same path. Enter your income, expenses and commitments, and it returns the surplus, the maximum loan and the property price your deposit plus that loan would reach.

The assessment rate and the +3% buffer

Here is the part the bank calculators tend to hide. Lenders do not test your repayment at the rate you will pay. They add a serviceability buffer, and APRA sets the minimum at 3.00 percentage points. A loan at 6.00% is assessed near 9.00%. The buffer is a stress test, so the loan still holds together if rates climb. Because the assessed repayment is larger than your real one, it shrinks the maximum loan you qualify for. The tool shows both figures side by side, so you can see the exact dollar amount the buffer costs you. The buffer field is adjustable, though 3.00% is the current standard.

Why your expenses matter as much as your income

Two people on the same salary can have very different borrowing power. Expenses are the reason. Lenders do not take your word for your spending alone. They compare it to the Household Expenditure Measure, a benchmark for a minimum reasonable spend based on your household size and income, and assess you on whichever is higher. Dependents lift that floor. Credit cards hurt too: a lender counts roughly 3.8% of your total card limit as a monthly commitment, even on a card you never touch. Closing an unused card can add tens of thousands to your borrowing power.

A worked example

Take a single applicant with $6,500 a month in take-home pay and $2,500 a month in living expenses, no other debts. That leaves a surplus of $4,000 a month. At a 6.00% rate the assessment rate is 9.00% (6.00% + the 3.00% buffer). Back-solving $4,000 a month over 30 years at 9.00% gives a maximum loan of about $497,000. Add a $100,000 deposit and the property budget is roughly $597,000. The actual repayment on that loan, at the real 6.00% rate, is about $2,981 a month, comfortably under the $4,000 surplus, which is the buffer doing its job. Without the buffer the same surplus would stretch to around $667,000, so the +3% test costs this borrower close to $170,000 in borrowing power.

Why lenders differ

This is an estimate, and a deliberately transparent one. Real lenders vary in ways a single model cannot capture. They shade rental income, treat bonuses and overtime differently, apply their own version of the HEM benchmark, and layer credit policy on top of the APRA buffer. Two lenders can be tens of thousands of dollars apart on the same numbers. Treat the figure here as a realistic starting budget, then confirm it with a lender or broker.

Frequently asked questions