Calculator
Borrowing Capacity
Estimate how much a lender might let you borrow. Uses APRA-style serviceability buffer (default 3%) on top of your product rate.
Estimated borrowing capacity
$370,938
Assessed at 9.40% over 30 years
Net annual income
$93,212
After estimated PAYG tax
Monthly surplus
$3,638
Income less expenses & commitments
Likely repayment
$27,843
$2,320 / month at product rate
HEM floor used
$24,000
Your declared expenses applied
General information only. Calculations are indicative, based on simplified rules current at FY2024–25, and exclude items such as foreign buyer surcharges, off-the-plan concessions, principal-place-of-residence rules and lender policy variation. Always verify with your accountant, broker and the relevant State Revenue Office calculator before transacting.
About this calculator
Borrowing Capacity Calculator (Australia)
Borrowing capacity is the single biggest constraint most Australian buyers face. Lenders don't lend against the rate you'll actually pay — they assess every application at the higher of your contract rate plus APRA's 3% serviceability buffer, then strip your real expenses down to the Household Expenditure Measure (HEM) floor. This calculator reproduces that logic so you can see the assessment loan a lender will actually offer, not the marketing number from a comparison site. We use FY2024–25 marginal tax rates, current Medicare levy and stress-test rates that match what the big four banks are running today.
When to use it
- Before pre-approval, to set a realistic target purchase price
- When deciding between owner-occupier and investment lending
- Modelling the impact of paying down a credit card or car loan
- Comparing the borrowing power of one vs two income earners
- Stress-testing a portfolio for the next +100 bps rate move
How to use it
- 1
Enter household income
Use gross annual salary for each applicant. Add gross rental income separately — lenders typically shade it to 70–80%.
- 2
Enter monthly expenses
Be honest. Lenders compare your declared expenses against HEM and use the higher number. Padding too low won't help — banks back-test against transaction data.
- 3
Add existing debts
Credit card limits (not balances), HECS/HELP, personal loans and car loans all reduce serviceability. Closing unused cards is the single fastest lever.
- 4
Set the assessment rate
Use the bank's product rate + 3.0% APRA buffer. For investment loans the buffer applies to existing debt too.
- 5
Read the result
The result is the loan amount a typical mainstream lender would approve. Non-bank and specialist lenders can extend further but at higher rates.
Methodology & assumptions
We calculate net monthly income by applying current Australian marginal tax rates and the 2% Medicare levy to each applicant's gross income, then add 70% of declared rental income to reflect standard lender shading.
Existing debt commitments are translated into a monthly serviceability burden at the APRA buffered rate, not the contract rate. A $20,000 credit card limit you never use still costs roughly $600/month in lost borrowing capacity.
Expenses default to the higher of your declaration or HEM for your household composition and income band. We use a simplified HEM table updated to FY2024–25 figures.
The maximum loan is solved by amortising the surplus monthly income over a 30-year term at the assessment rate. That number, plus deposit and acquisition costs, is your real purchase budget.
Common pitfalls we see
- Treating the comparison-rate result as your borrowing limit — banks assess +3%, not the headline rate.
- Forgetting HECS/HELP. Above ~$56k taxable income it hits at 1–10% of gross and is non-negotiable.
- Declaring expenses below HEM. Lenders back-test against your bank statements and will revise upward anyway.
- Carrying high credit card limits. The limit, not the balance, is what reduces your capacity.
- Using gross rent at 100%. Mainstream lenders apply a 20–30% haircut for vacancy, agent fees and maintenance.
Frequently asked questions
Why is my borrowing capacity lower than expected?
Three drivers usually explain it: an APRA serviceability buffer of 3% added to the assessment rate, HEM-floored expenses that override your declared figure, and credit card limits being assessed as fully drawn debt.
Does HECS / HELP reduce borrowing capacity?
Yes — significantly. Repayments start at 1% of gross income around $56,000 and step up to 10% at higher incomes. A $90k earner on HELP loses roughly $40,000–60,000 of borrowing capacity vs the same income without HELP.
Will refinancing or paying down debts increase my capacity?
Closing a $20,000 credit card limit typically frees $80,000–110,000 of borrowing capacity at current assessment rates. Personal and car loans free even more dollar-for-dollar.
Can I borrow more with two incomes?
Joint applications generally lift capacity by 60–90% of the second income, depending on the lender's living expense methodology. Two PAYG incomes are usually viewed more favourably than one PAYG + one self-employed.
How accurate is this borrowing capacity calculator?
It's a planning tool, not a credit decision. Final assessment depends on the specific lender's policy, your credit file, employment type and the structure of any existing portfolio. Always confirm with a broker before bidding.