Why use this calculator
Bank borrowing calculators disagree with each other by tens of thousands of dollars because each one hides its assumptions: which tax year it uses, how it treats credit card limits, what expense floor it applies and what buffer it adds to the rate. This one shows every step.
It converts gross income to take-home pay with the current financial year's tax brackets, Medicare levy, low income tax offset and study loan repayments, counts 3.8 per cent of every credit card limit as a monthly commitment the way most lenders do, and tests the loan at your rate plus the 3 percentage point buffer the Australian Prudential Regulation Authority requires banks to apply.
You get the headline figure, the repayment at your real rate, the debt-to-income multiple APRA watches, and a table of how the maximum changes as rates move, so you know how much room a rate rise would leave before you commit to a purchase price.
How to use it
- Enter your gross annual income from your payslip, and your partner's if you are applying together; leave the second income at zero for a solo application.
- Say whether compulsory study loan repayments come out of your pay, which your income statement in myGov shows.
- Enter realistic monthly living expenses from three months of bank statements, leaving out rent and loan repayments.
- Add the monthly repayments on any car, personal or buy-now-pay-later loan that will continue after you buy, and the total limit on all your credit cards, taken from the card statements.
- Enter the interest rate of the loan you are looking at and leave the buffer at 3 unless a lender has told you it uses a different figure.
- Set the loan term, usually 30 years, and read the borrowing power and the table underneath.
What each result means
- Estimated borrowing power
- The largest principal and interest loan your monthly surplus can service at the assessment rate over the term, rounded down to the nearest thousand. Each lender applies its own expense floor and policies, so treat it as the centre of a range.
- Monthly repayment at your actual rate
- What that loan would really cost each month at the rate you entered, which is lower than the repayment the lender tests because the buffer is not charged.
- Repayment the lender tests you at
- The repayment on the same loan at the rate plus buffer. It equals your surplus by construction: the loan is sized so this tested repayment is exactly what you have left.
- Net monthly income after tax
- Combined take-home pay after income tax, the Medicare levy, the low income tax offset and study loan repayments, divided by twelve. Lenders start from this figure, not gross salary.
- Monthly surplus after expenses and debts
- Net income less living expenses, other loan repayments and the assessed cost of credit card limits. This is the money a new mortgage repayment has to come out of.
- Debt-to-income ratio
- The loan divided by combined gross annual income. APRA requires lenders to report loans at six times income or more and many lenders cap or price them differently.
- Credit card limits counted as
- The monthly commitment a lender assumes from your card limits, about 3.8 per cent of the total limit, even for cards you pay off in full. Closing or reducing cards raises borrowing power immediately.
- Assessment rate
- The interest rate the loan is tested at: your loan rate plus the serviceability buffer. It is never the rate you pay.
The formula
Net income equals gross income less income tax, Medicare levy and any study loan repayment for the financial year, using the brackets in src/lib/tax-au.ts. Monthly surplus equals net income divided by 12, less living expenses, less other loan repayments, less 3.8 per cent of total credit card limits. Assessment rate equals the loan rate plus the buffer, 3 percentage points by default. Borrowing power equals the surplus multiplied by (1 minus (1 plus r) to the power of minus n) divided by r, where r is the monthly assessment rate and n the number of monthly repayments over the term, rounded down to the nearest thousand. Debt-to-income equals the loan divided by combined gross income.
How this number is used in practice
Borrowing power is the first number a mortgage broker asks about and the one that sets your property search range, yet it is the most fragile figure in the process. A half-point rise in the loan rate takes the assessment rate up by the same amount and strips about five per cent off the maximum, which on a $700,000 loan is roughly $35,000 of purchase price.
Buyers who go to auction at the top of a pre-approval obtained three months earlier regularly find the number has shrunk when the formal application is assessed at the new rate.
The fastest ways to lift the figure are not pay rises but housekeeping: closing unused credit cards removes 3.8 per cent of each limit from the monthly commitments, paying out a small car loan early returns its whole repayment to the surplus, and documenting lower genuine expenses helps only up to the lender's benchmark floor, below which the lender substitutes its own figure.
A HELP debt matters more than most people expect because the compulsory repayment reduces take-home pay by several hundred dollars a month at a graduate salary, and lenders assess that pay, not the gross figure.
Worked examples
Single applicant on $95,000, $2,500 a month of expenses, no other debt, 6% rate over 30 years
$456,000 of borrowing power. Net income is $6,173.33 a month, leaving a $3,673.33 surplus that services $456,000 at the 9% assessment rate; the real repayment at 6% is $2,733.95 a month.
Couple on $110,000 and $70,000, $4,200 of expenses, a $450 car loan and $15,000 of card limits
$815,000. Combined net income is $11,780.00 a month; after expenses, the car loan and $570.00 for the card limits the surplus is $6,560.00, which supports $815,000 at 9%.
Graduate on $72,000 with a HELP debt, $2,200 of expenses, no other debt, 6.5% rate
$313,000. Study loan repayments cut net income to $4,839.10 a month, the surplus is $2,639.10 and it is tested at 9.5%, so the maximum is far below the no-HELP figure.
When people use it
- Setting a realistic price range before you start inspecting properties or register for an auction.
- Checking what closing a credit card or paying out a car loan would add to a pre-approval.
- Seeing how far borrowing power falls if rates rise before you buy, using the rate table.
- Comparing a solo application with a joint one, or testing the effect of a second applicant's part-time income.
- Working out whether a HELP debt is worth paying down before applying for a mortgage.
Tips
- Pull three months of bank statements before entering expenses; the lender will, and subscriptions you forgot about still count.
- Reduce or close credit card limits two to three months before applying, so the lower limit shows on the statements the lender sees.
- Use the rate table to pick a purchase price that still works if the assessed rate is half a percentage point higher at settlement.
- A debt-to-income ratio above six is a flag even when the surplus test passes; aim lower if you want the widest choice of lenders.
- Keep the result as a ceiling, not a target. Repayments at the real rate on the maximum loan leave little margin once rates, rates notices and insurance move.
- If a second applicant's income is irregular, enter the figure a lender would accept, typically a two-year average of overtime, bonus or commission income.
What it assumes, and where it stops being accurate
- Tax is calculated for an Australian resident for 2026-27 with the standard Medicare levy and the low income tax offset. No deductions, offsets, family tax benefit, rental income or salary sacrifice are modelled.
- Living expenses are used as entered. Real lenders apply a household expenditure benchmark floor by income and family size and use the higher of your figure and the benchmark, so a very low expense entry overstates borrowing power.
- Credit card limits are assessed at 3.8 per cent of the total limit per month, a common lender convention, not a rule every lender follows.
- The whole monthly surplus is treated as available for the new repayment. Many lenders keep back a minimum net surplus or cap the share of income going to repayments, which produces a lower figure.
- Only principal and interest repayments over the full term are modelled. Interest-only periods, offset accounts, lenders mortgage insurance and fees are left out, and investment property rental income is not added.
Terms used on this page
- Serviceability
- A lender's test of whether your income, after expenses and other debts, can meet the repayments on a loan at a stressed interest rate.
- Assessment rate
- The loan rate plus the regulator's buffer, used only to test affordability. Repayments are charged at the real rate.
- Debt-to-income ratio
- Total debt divided by gross annual income. APRA treats six times income or more as high.
- HEM
- The Household Expenditure Measure, a benchmark of basic living costs by income and household size that lenders use as a floor for declared expenses.
Questions people ask
- Why is my borrowing power lower than a bank's calculator shows?
- Most bank calculators ask for fewer inputs and quietly assume no credit cards, no study loan and benchmark expenses, so they tend to show a higher figure. This calculator converts gross pay to after-tax pay, deducts study loan repayments and counts card limits, which is what the bank's actual assessment does when you apply, so the figure here is usually closer to the formal approval.
- What is the 3% buffer and can I turn it off?
- The Australian Prudential Regulation Authority requires banks to test whether you could still afford repayments if your rate rose by at least 3 percentage points. You can lower the buffer field to see the effect, but a bank cannot, so the figure with the buffer removed is not one any regulated lender would approve. Some non-bank lenders use a smaller buffer, which is why their maximums look higher.
- Do credit cards really matter if I pay them off every month?
- Yes. Lenders assess the limit, not the balance, because you could draw the full limit the day after settlement. A $20,000 limit is treated as roughly $760 a month of commitments, which removes around $90,000 of borrowing power at a 9% assessment rate. Reducing the limit or closing the card before you apply restores it.
- Does the calculator include rental income from an investment property?
- No. Lenders usually count 70 to 80 per cent of expected rent as income and add the investment loan repayment to your commitments, and the rules differ between lenders. Enter the net effect yourself: add the counted rent to your gross income and the investment repayment to other loan repayments, then read the result as an approximation.
- How accurate is this compared with a formal pre-approval?
- It uses the same structure as a lender's serviceability calculator, so the result should sit within about ten per cent of a formal assessment for a straightforward salaried applicant. Self-employed income, casual work, child support, family tax benefit, guarantors and lenders mortgage insurance all change the answer, and only a lender or broker can give you a figure you can bid on.
- What debt-to-income ratio do lenders want?
- APRA treats loans at six times gross income or more as high debt-to-income lending and makes banks report them, so several lenders cap new loans below that multiple or price them higher. Below six the ratio rarely decides the outcome on its own; the surplus test does. The result shows your multiple so you can see which side of the line a maximum loan would put you.
Use this with
Borrowing Power Calculator answers one part of the question. These pick up where it stops: Home Affordability Calculator, Mortgage Calculator, Stamp Duty Calculator, First Home Buyer Calculator, Salary After Tax Calculator, HECS-HELP Repayment Calculator and Mortgage Offset Calculator.
Where these figures come from
Figures and rules on this page follow Australian law and ATO guidance.
- APRA: Update on APRA's macroprudential settings, November 2024. Serviceability buffer kept at 3 percentage points
- APRA: Loan serviceability expectations raised to counter rising risks in home lending. The 2021 move from 2.5 to 3 percentage points
- Moneysmart: Mortgage calculator. The regulator's own repayment and affordability tool
- ATO: Tax rates for Australian residents. Income tax brackets for 2026-27
Borrowing Power Calculator produces an estimate for general information. It is not financial, tax, medical, legal or engineering advice. read the full disclaimer. Spotted a wrong number? Report it and it gets fixed. The form picks up this calculator and the inputs you used.