Borrowing Power Calculator
Estimate how much you can borrow for a home loan based on your income, living expenses, and current Australian lending standards.
Your Financial Details
If left below the HEM benchmark for your household, the bank minimum will be used.
HEM benchmark: $2,000/month
Include credit cards, car loans, personal loans, and other home loan repayments.
Maximum Borrowing Capacity
$364,695
Estimated purchase price: $455,869 (with 20% deposit)
Monthly Repayment at 7.5%
$2,550
per month
Monthly Net Income
$6,000
approx. after tax
Living Expenses Used
$3,000
HEM or your figure
This is an estimate only. Actual borrowing capacity depends on your specific financial situation, lender policies, and current interest rates. Speak with a mortgage broker for a personalised assessment.
How Banks Assess Your Borrowing Capacity
Australian banks use a serviceability assessment to determine the maximum loan you can afford. The process works roughly as follows:
- Gross income — Your total income (wages, salary, rental income, etc.) from all applicants is added together.
- Net income — An after-tax estimate is calculated. This calculator uses a simple 72% net factor as an approximation.
- Living expenses (HEM) — Banks deduct your living costs. They use the higher of your declared expenses or the HEM benchmark — a minimum expense figure that varies by household size.
- Existing debts — All existing monthly debt repayments (credit cards, car loans, personal loans, other mortgages) are deducted.
- Serviceability buffer — APRA requires banks to test your repayment capacity at your actual rate plus 3%. This is why the default assessment rate is 7.5% even when market rates may be lower.
- Maximum loan — From the remaining surplus, the bank back-calculates the loan amount whose repayments fit within approximately 85-90% of that surplus.
Frequently Asked Questions
How do banks calculate borrowing power?
Australian banks assess your borrowing capacity by looking at your gross income (both applicants if applicable), then estimating your net income after tax. They deduct living expenses — using either your declared expenses or the Household Expenditure Measure (HEM) benchmark, whichever is higher — plus any existing debt repayments. The remaining surplus determines how much you can repay, and from that they back-calculate the maximum loan.
What is the HEM benchmark?
HEM (Household Expenditure Measure) is a benchmark developed by Melbourne Institute. Banks use it as a minimum living expense figure — if your declared expenses are lower than HEM, they'll use HEM instead. The amount varies based on household composition and location, but broadly ranges from around $2,000/month for singles to $4,000+/month for families.
What is a serviceability buffer?
APRA (the banking regulator) requires lenders to assess your ability to repay at your actual interest rate plus a 3% buffer. So if current rates are around 6%, banks test whether you can afford repayments at 9%. This protects borrowers from rate rises and is why the assessment rate in this calculator defaults to 7.5%.
How can I increase my borrowing power?
You can increase borrowing power by reducing existing debt (especially credit card limits, as banks count the full limit not just balances), increasing income, reducing declared living expenses (where genuine), extending the loan term, or applying jointly with a partner. Closing unused credit cards can make a significant difference.
Does this calculator give an exact figure?
No. This is an estimate based on simplified assumptions. Each lender has its own policies, HEM tables, and income treatment rules. For an accurate figure, speak with a mortgage broker who can assess multiple lenders on your behalf.