Borrowing Capacity Calculator (AU)
Calculate how much you can borrow for a home loan in Australia based on your income, expenses, and deposit. Free AU borrowing capacity calculator.
How Borrowing Capacity Works in Australia
Borrowing capacity is the maximum loan amount a lender will approve based on your income, living expenses, existing debts, and their assessment criteria. It's not about what you want to borrow — it's what the bank calculates you can safely repay under stress-tested conditions.
The APRA Serviceability Buffer
Since October 2021, APRA requires all ADI lenders (banks, credit unions) to assess loan applications at the customer's interest rate plus a buffer of at least 3 percentage points. So if your actual rate is 6.2%, the bank assesses whether you can afford repayments at 9.2%. This dramatically reduces borrowing capacity compared to pre-buffer calculations.
Income Shading
Lenders don't count all income at face value. Regular PAYG salary is typically counted at 100%, but overtime, bonuses, and commission may be "shaded" to 80%. Rental income is usually counted at 80% to account for vacancy and costs. Self-employed borrowers often face stricter assessment — typically using the lower of the last two years' tax returns.
HEM vs Declared Expenses
Lenders use the Household Expenditure Measure (HEM) as a benchmark for living costs. HEM is based on ABS data and varies by household size and income. Most lenders use the higher of your declared expenses or HEM. If you declare $2,000/month but HEM for your profile is $2,800, the bank will use $2,800. Some lenders are now using 130% of HEM as a floor.
How Credit Cards Affect Borrowing
Even if you pay your credit card in full each month, lenders assume you could max it out. They typically add 3% of your total credit card limit as a monthly commitment. A $10,000 card limit reduces your borrowing by roughly $40,000–$50,000. Closing unused cards before applying can significantly increase your capacity.
Debt-to-Income Ratio (DTI)
Some lenders now apply DTI limits (typically 6x–7x gross income) as a hard cap regardless of serviceability calculations. Even if the numbers say you can afford more, a DTI limit may reduce your maximum. APRA monitors DTI ratios across the industry as a macroprudential measure.
HECS/HELP Impact
Your HECS/HELP debt creates mandatory repayments once income exceeds $54,435 (2024-25). The repayment rate ranges from 1% to 10% of income. Lenders deduct this from your assessable income. A $40,000 HECS debt at $95,000 income means roughly $4,750/year in compulsory repayments, reducing borrowing by approximately $60,000.
Tips to Increase Borrowing Capacity
Close unused credit cards and BNPL accounts. Pay down or consolidate existing debts. Consider a longer loan term (30 vs 25 years). Apply jointly if both earning. Reduce declared expenses honestly. If possible, pay off HECS/HELP before applying. Consider a different lender — capacity varies by up to 20% between banks.
Frequently Asked Questions
▼ How accurate is this calculator?
This provides an estimate based on standard assessment methodology. Each lender has proprietary credit models and policy overlays. Actual approval amounts typically vary ±10–20% from calculators. Use this as a planning tool, then get pre-approval for an exact figure.
▼ Does LMI increase my borrowing capacity?
No — Lenders Mortgage Insurance (LMI) protects the bank, not you. It allows you to borrow above 80% LVR, but doesn't increase the loan amount you're assessed for. You'll still need to service the full loan amount at the buffer rate.
▼ Can I borrow more with an interest-only loan?
Usually no. APRA requires lenders to assess IO loans at P&I repayments for the remaining term after the IO period. Some lenders assess at the IO rate plus buffer, which can paradoxically reduce capacity due to higher effective rates on shorter remaining terms.
▼ How do lenders treat BNPL?
Practices vary. Most major banks now ask about BNPL commitments. Some treat them like credit cards (using the limit), others assess actual repayments. Closing BNPL accounts at least 3 months before applying is recommended.
▼ Why do different banks give different amounts?
Each bank uses different HEM floors, income shading policies, DTI limits, and credit scorecards. Non-bank lenders may not be bound by APRA's buffer. A good broker can identify which lender gives you the best capacity for your specific situation.