How the borrowing power calculator works
The calculator follows the broad structure of a lender serviceability assessment. It begins with the gross annual income of the first applicant and, where relevant, a second applicant. Each income is taxed separately at 2026-27 resident rates, with the Medicare levy added, because Australia taxes individuals and not households. Treating two salaries as a single income would overstate the tax payable and understate borrowing capacity. The two after-tax figures are then combined and converted to a monthly amount, which represents the income available to the household.
From that monthly income the calculator deducts living expenses, repayments on other loans and an allowance for credit cards equal to 3.8% of the total limits each month. The remainder is the assessable surplus. The surplus is treated as the largest repayment the household could sustain, and the calculator determines the loan that such a repayment would clear over the selected term at the entered interest rate plus three percentage points. The result is rounded down to the nearest $1,000 and displayed alongside the repayment at the entered rate.
Choosing the inputs: income, expenses, debts and loan term
Income should be entered as gross annual income before tax and excluding employer superannuation contributions. Base salary is the most reliable figure to use. Lenders generally discount or average overtime, bonuses, commissions, casual earnings and rental income, so applicants who depend on variable income may wish to enter a conservative amount. Self-employed applicants are generally assessed on the taxable income shown in recent tax returns, which may be lower than the turnover or drawings of the business.
Living expenses should reflect realistic household spending on groceries, utilities, transport, insurance, childcare, education and discretionary items, excluding rent that will cease after the purchase. The calculator applies a minimum living-expense benchmark, which rises where there is a second applicant and again for each dependant. Where the declared figure is below that floor, the floor is used and a note appears in the results. Entering a very low expense figure therefore does not increase the estimate, which mirrors the approach lenders generally take.
Other loan repayments should include the monthly amounts payable on personal loans, car finance and similar commitments. Credit cards are entered as the total of all approved limits and not the balance owing. The interest rate should approximate the rate expected on the new loan, and the calculator adds the buffer automatically, so the buffer should not be added manually. The term may be set between 10 and 30 years. A longer term lowers the assessed repayment and lifts the estimate, although it increases the total interest payable.
The APRA serviceability buffer and the assessment rate
The Australian Prudential Regulation Authority expects banks and other authorised deposit-taking institutions to test whether a new borrower could meet repayments at an interest rate above the rate actually charged. This margin is the mortgage serviceability buffer. It is currently three percentage points, a setting APRA reviews periodically and most recently confirmed in its 2026 macroprudential updates, and it is subject to change. APRA describes the buffer as a contingency against rises in interest rates and unforeseen changes in the income or expenses of a borrower.
The effect on borrowing capacity is considerable. As an illustrative example, the monthly repayment on a hypothetical $500,000 loan over 30 years is approximately $2,998 at 6.00%, but approximately $4,023 at an assessment rate of 9.00%. The lender tests affordability against the higher figure, although the borrower pays the lower one. The Reserve Bank of Australia has estimated that a change of half a percentage point in the buffer alters maximum loan sizes by roughly 5% for a typical borrower. Non-bank lenders are not regulated by APRA and may apply different buffers.
How Australian lenders assess income and living expenses
Australian credit providers are subject to responsible lending obligations and must make reasonable inquiries about the financial situation of an applicant, and verify it, before approving a home loan. In practice this involves payslips, tax returns, bank statements and a detailed expense declaration. The declared expenses are generally compared with a benchmark, most commonly the Household Expenditure Measure, which varies with household composition, location and income. Lenders generally adopt the higher of the declared figure and the benchmark. The expense floor in this calculator is a simplified stand-in for that process.
Lender policies differ in ways that a general calculator cannot reproduce. Institutions apply different discounts to variable income, different expense benchmarks, different treatment of rental income and negative gearing, and different minimum assessment rates. Since early 2026, APRA has also limited the share of new lending that banks may extend at a debt-to-income ratio of six times or more, which may constrain borrowers with large existing debts relative to income. The same applicant may therefore receive materially different maximum loan amounts from different lenders.
How debts, credit card limits and HELP debts reduce borrowing capacity
Existing commitments reduce borrowing power directly, because each dollar committed elsewhere is unavailable to service the new loan. Credit cards are assessed on the approved limit, on the assumption that the limit could be fully drawn at any time. Under the 3.8% convention used by this calculator, a $10,000 limit is treated as a commitment of $380 per month, even where the card is repaid in full each month. At an assessment rate of 9.00% over 30 years, a commitment of $380 per month corresponds to approximately $47,000 of borrowing capacity.
Personal loans, car finance and buy now, pay later accounts are generally counted at their actual repayment. Compulsory repayments on a study and training loan, commonly known as a HECS or HELP debt, are collected through the tax system and reduce take-home pay. The calculator does not deduct them automatically, so borrowers with such a debt may include the approximate monthly repayment in the other loan repayments field. Lender treatment of study debts varies, and some lenders may disregard a balance that is close to being cleared.
Illustrative borrowing capacity examples for a single and a couple
The following figures are hypothetical and use the simplified model in this calculator. A single applicant earns $100,000 gross, which is approximately $77,480 after estimated tax and Medicare levy, or $6,457 per month. With declared living expenses of $3,000 per month and no other debts, the assessable surplus is $3,457. At an entered rate of 6.00%, assessed at 9.00% over 30 years, the estimated borrowing power is $429,000, with a repayment of approximately $2,572 per month at the entered rate. Adding a $10,000 credit card limit reduces the estimate to $382,000.
In a second illustrative case, a couple earn $90,000 and $70,000, which is approximately $70,680 and $57,080 after tax, or $10,647 per month combined. They have one dependant, declare expenses of $4,500 per month, repay a car loan at $500 per month and hold a $10,000 card limit. The surplus is $5,267 and the estimate is $654,000, with a repayment of approximately $3,921 per month at 6.00%. Without the car loan and the card, the estimate rises to $763,000, a difference of $109,000 arising from two modest commitments.
Common mistakes when estimating how much can be borrowed
A frequent error is to treat the estimate as a purchase budget. Borrowing power describes the loan only. The purchase price that it supports depends on the deposit remaining after transfer duty, legal fees and other costs have been paid, and the stamp duty calculator may be used to estimate the largest of those costs. A second error is to understate living expenses in the expectation of a higher result. Lenders examine bank statements, and a benchmark is applied in any event, so an understated figure tends to produce only a misleading estimate.
Other common oversights include entering credit card balances in place of limits, omitting buy now, pay later accounts, counting the full value of bonuses or overtime, and overlooking expenses that will begin after the purchase, such as council rates, strata levies and building insurance. Applicants also sometimes compare a result at the advertised interest rate with repayments they could manage today, without recognising that approval is tested three percentage points higher. The maximum a lender may approve is also not a recommendation that the full amount be borrowed.
How to act on a borrowing power estimate
The estimate is most useful as a starting point for planning. Borrowers may test how the result responds to changes within their control, such as closing an unused credit card, clearing a small personal loan before applying, or adding a second applicant. It is also prudent to test less favourable conditions. In the single applicant example above, raising the entered rate from 6.00% to 7.00% reduces the hypothetical estimate from $429,000 to $393,000, and shortening the term from 30 to 25 years reduces it to $411,000.
A formal assessment is the next step for borrowers who intend to proceed. A lender or mortgage broker can confirm how a particular institution would treat the income, expenses and debts involved, and a conditional pre-approval provides a firmer figure for property searches, although it is not a guarantee of finance. Multiple credit applications within a short period may affect a credit report, so it is generally preferable to narrow the choice of lender before applying. General information of this kind does not take personal circumstances into account.
Related decisions: deposit, LVR and the total purchase budget
Serviceability is only one of the tests a lender applies. The loan to value ratio, or LVR, measures the loan against the value of the property, and a loan above 80% of the value will ordinarily attract lenders mortgage insurance unless a guarantee applies. The deposit calculator shows the cash required for deposits of 5%, 10% and 20%, and eligible first home buyers may be able to purchase with a small deposit under the Home Guarantee Scheme, now marketed as the Australian Government 5% Deposit Scheme, subject to property price caps.
Borrowers may also compare the maximum a lender might approve with the repayment the household is content to sustain. The property affordability calculator works backwards from a chosen repayment to an indicative price, and the mortgage repayment calculator shows the cost of a given loan at different rates. Where the two approaches produce different figures, the lower one is generally the more prudent guide. Existing owners who are considering refinancing or releasing equity are assessed under the same serviceability rules, so the estimate is relevant to those decisions as well.
Borrowing Power Calculator: frequently asked questions
How much can I borrow for a home loan in Australia?
The amount depends on income, living expenses, dependants, existing debts, credit card limits, the interest rate and the loan term, together with the policy of the individual lender. Two lenders may produce materially different figures for the same applicant. The calculator provides an indicative estimate using a standard serviceability approach, which may then be refined through a formal assessment by a lender or mortgage broker.
How is borrowing capacity calculated?
Lenders generally estimate after-tax income, deduct living expenses and all existing commitments, and treat the remaining surplus as the repayment the applicant could sustain. That repayment is converted into a loan amount at an assessment rate above the actual loan rate. This calculator follows the same steps, taxing each applicant individually and adding a buffer of three percentage points to the entered rate.
What is the APRA serviceability buffer?
It is a margin that APRA expects banks and other authorised deposit-taking institutions to add to the loan interest rate when assessing whether a borrower can afford repayments. The buffer is currently three percentage points, although it is reviewed periodically and is subject to change. A loan priced at a given rate is therefore assessed as though the rate were materially higher.
Do credit card limits affect borrowing power?
Yes. Lenders generally assess credit cards on the total approved limit, regardless of the balance owing or whether the card is repaid in full each month. A monthly commitment is calculated as a percentage of the limit, which this calculator sets at 3.8%, and deducted from the income available to service the loan. Reducing unused limits before applying may increase borrowing capacity.
How much can a couple borrow compared with a single applicant?
A second income generally increases borrowing capacity substantially, because each applicant is taxed separately and benefits from the tax-free threshold and lower marginal rates. The increase is partly offset by higher assumed living expenses for a two-adult household and for any dependants. The calculator accepts an optional second applicant income so that the two positions may be compared directly.
Does a HECS or HELP debt reduce how much I can borrow?
Generally, yes. Compulsory repayments on a study and training loan are collected through the tax system once income exceeds the repayment threshold, which reduces the surplus available to service a home loan. Lender treatment varies, and some lenders may disregard a debt that is close to being repaid. The approximate monthly repayment may be entered in the other loan repayments field of the calculator.
What is the Household Expenditure Measure?
The Household Expenditure Measure, or HEM, is a benchmark of household living costs that varies with household composition, location and income. Lenders generally compare the expenses declared by an applicant with the relevant benchmark and use the higher of the two. Declaring very low expenses does not usually increase borrowing power, and this calculator applies a simplified minimum for the same reason.
How can I increase my borrowing power?
Measures commonly considered include reducing or closing unused credit card limits, repaying small personal debts, reviewing discretionary spending in the months before an application, saving a larger deposit and applying jointly. A longer loan term may lift the assessed capacity while increasing total interest. Lender policies differ, so a broker or lender can indicate which measures would have the greatest effect in a particular case.