Borrowing Power Calculator

How Borrowing Capacity is Calculated

Borrowing capacity is the loan amount your available monthly income can repay at an assessment interest rate. This calculator estimates that amount for a principal-and-interest home loan. It applies tax to each applicant separately, then subtracts shared household costs once.

1. Add the income accepted for assessment, using the percentages you set for bonus, overtime and rental income.
2. Subtract estimated income tax, Medicare and any study-loan repayment you enter. Income discounts do not reduce the gross income used for the automatic tax estimate.
3. Subtract living expenses, existing loan repayments, the credit-card allowance and your monthly reserve.
4. Convert the remaining monthly payment into a loan amount over your chosen term, using the higher of the loan rate plus buffer or your minimum assessment rate.

At the starting settings, a single applicant earning $100,000 has estimated annual tax and Medicare of $22,520. After $3,000 in monthly living expenses and a $500 reserve, $2,956.67 a month remains for an assessed repayment. Over 30 years at a 9% assessment rate, that supports an estimated loan of $367,460. The repayment at the example 6% loan rate is about $2,203 a month.

Income and Expenses That Change the Result

Use each applicant's annual income before tax. Splitting the same total income between two applicants can change the estimate because each person's tax is calculated separately. Bonus, overtime and rent can count at a lower percentage for assessment while remaining taxable in full.

Enter the household's living costs once. Include food, utilities, transport, insurance, childcare and other recurring expenses. Add ongoing loan repayments separately. For credit cards, enter the total limits: an unused card can still reduce the amount a lender is willing to offer.

If your living expenses already include the cost of your dependants, leave the extra cost per dependant at zero. Otherwise, add the missing amount. The minimum living-expense field lets you test a higher allowance, but it does not reproduce a lender's expense benchmark.

For rental income, enter gross rent and include ongoing property expenses and loan repayments in their respective fields. The automatic tax estimate does not calculate rental deductions. Use the annual tax override if those deductions or other tax adjustments materially change your tax.

How Much Can I Borrow on This Income?

The same income can support different loans depending on expenses, existing debts and the assessment rate. These examples use the calculator's starting 6% loan rate, 3-percentage-point buffer, 30-year term, $3,000 monthly living expenses and $500 reserve. They include no other income, debts, dependants or study-loan repayments.

These are estimates under the stated tax assumptions, not lending limits for those salaries. Enter your own costs and use the comparison chart to see the effect of higher expenses, a higher assessment rate or a shorter loan term.

Return to the $100,000 single-applicant example to compare household changes. Adding one dependant with $500 of extra monthly costs reduces the estimate to $305,319. Reset those costs, then enter a $10,000 credit-card limit at the starting 3% monthly allowance: the estimate becomes $330,175. Each change reduces the income available for the new repayment.

First-home buyers can use the same calculation, but must allow separately for a deposit and purchase costs. For refinancing, exclude the repayments of the loan being replaced and include debts that continue. If you are self-employed, use the income accepted for the scenario rather than business turnover; the lender's treatment of your financial statements still determines its assessment.

Why a Lender's Calculator Can Differ

A lender's borrowing-power calculator can apply different rules to variable income, rent, dependants, credit cards and existing loans. It may use a household expense benchmark above your declared spending, an assessment-rate floor or a limit based on total debt relative to income.

APRA's credit risk standard sets a mortgage serviceability buffer of at least 3 percentage points for authorised deposit-taking institutions, subject to the standard's provisions. This tool starts with that buffer, but it does not reproduce every lender's policies or exceptions.

Your deposit and the property's value also limit the loan available. A borrowing-capacity estimate does not include stamp duty, lenders mortgage insurance, purchase fees or a credit assessment. Use it to prepare a scenario, then check the lender's current assessment before committing to a purchase.