Borrowing Power Calculator

How we calculate this

The formula

P

the largest loan the surplus can service (your borrowing power)

S

the money left each month to put towards a loan repayment

r

the monthly assessment rate, which is the buffered annual rate divided by 12

n

the number of monthly repayments, which is the term times 12

We then apply:

• S = take-home pay − living expenses − existing debt repayments − (dependants × $400)
• Assessment rate = the loan rate + 3.00 percentage points
• P is then rounded down to the nearest $1,000

What we assume

• Assessed at the APRA buffer, not at the loan rate. APRA expects banks to check you could still afford the loan if rates rose, so they assess you at least 3.00 percentage points above the actual rate. That figure comes from APRA’s letter to authorised deposit-taking institutions of 6 October 2021, which raised the buffer from 2.5 percentage points. Most other lenders do the same, and so do we. That is why the figure is lower than the repayment calculator would suggest for the same surplus.
• Debt-to-income limits are not tested. Since 1 February 2026 APRA has limited loans at a debt-to-income ratio of six or more to 20% of each bank’s new owner-occupier lending, and separately 20% of its new investor lending. Loans for new dwellings and bridging loans are exempt. A bank near that limit may lend less than this estimate to a borrower with high debt relative to income.
• Income is take-home pay, not gross salary. We ask for income after tax rather than modelling the tax scales ourselves. Enter your gross salary by mistake and the estimate will be far too high.
• Each dependant adds a flat $400 a month. A rough stand-in so that more dependants reduce the estimate. Lenders use Household Expenditure Measure benchmarks scaled by household size and income, which is more detailed and usually stricter.
• Every dollar of surplus goes to the loan. The estimate assumes your whole monthly surplus services the mortgage. Most lenders require a buffer on top, so treat this as a ceiling rather than a target.
• Deposit, LVR and mortgage insurance are not tested. Serviceability is only half of a lending decision. Your deposit size, the loan-to-value ratio, lenders mortgage insurance, credit history, employment type and the lender’s own policy all affect what you can actually borrow.
• Principal and interest over the whole term. Interest-only periods and fixed-then-revert structures are not modelled, and the rate is held flat for the full term.

A worked example

$8,000 a month in take-home pay, $3,000 of living expenses, no other debt repayments, 1 dependant, looking at a 6.00% p.a. loan over 30 years.

1. Work out what is left each month$8,000 − $3,000 − $0 − $400 for 1 dependantS = $4,600 a month
2. Add the serviceability buffer to the rate6.00% + 3.00 percentage pointsassessed at 9.00% p.a.
3. Turn that into a monthly rate and a number of repayments9.00% ÷ 12, and 30 years × 12r = 0.007500, n = 360 months
4. Work out the growth factor(1 + 0.007500) multiplied by itself 360 times(1 + r)ⁿ = 14.7306one plus r, to the power n, equals 14.7306
5. Ask what loan that surplus repays$4,600 × (14.7306 − 1) ÷ (0.007500 × 14.7306)P = $571,696.58
6. Round down to the nearest $1,000a borrowing-power figure is a ceiling, so it is never rounded up$571,000

Figures above are rounded for reading, so a line can differ by a dollar from the exact arithmetic. The calculator itself works to full precision.

That household could service roughly $571,000, on repayments of about $4,594 a month at the 9.00% assessment rate. At the actual 6.00% rate the repayment would be $3,423.