Estimate your Australian mortgage borrowing power — including the APRA 3% serviceability buffer, income, expenses, and existing debts.
How Australian Banks Calculate Borrowing Power
Your borrowing power — the maximum amount a lender will lend you — is determined by your income, expenses, existing debts, and the APRA serviceability buffer. This calculator provides a realistic estimate using the same principles that Australian lenders apply, though actual figures will vary between lenders.
The APRA Serviceability Buffer
Since October 2021, APRA requires all authorised deposit-taking institutions (banks, credit unions, building societies) to assess home loan applications at the actual interest rate plus 3%. This is the serviceability buffer. If the loan rate is 6.5%, your repayment capacity is tested at 9.5%. This significantly reduces borrowing power compared to pre-buffer calculations, but it protects borrowers from overcommitting if rates rise.
How Net Income Is Calculated
This calculator estimates your after-tax income using the 2024–25 Australian income tax brackets and Medicare levy. For most salaried employees, this gives a close approximation of take-home pay. Lenders may treat certain income types differently — for example, overtime, bonuses, and rental income are often assessed at 80% of their stated value to account for variability. Self-employed income is typically averaged over two years.
The Role of Living Expenses
Lenders assess declared living expenses against the Household Expenditure Measure (HEM) — an independent benchmark of minimum living costs based on household size and location. Your borrowing power is constrained by whichever is higher: your declared expenses or the relevant HEM. Being realistic about your spending helps lenders give you an accurate assessment and prevents financial stress after settlement.
Maximum Property Price at 80% LVR
The maximum property price shown assumes you borrow 80% of the property value (an LVR of 80%), meaning you have a 20% deposit plus enough for stamp duty and other purchase costs. At 80% LVR, no Lenders Mortgage Insurance (LMI) is required, which can save thousands. If you have a smaller deposit, your purchasing power may extend further but LMI costs apply. Use our Property Borrowing Power calculator for deposit-specific scenarios.
Frequently Asked Questions
How do Australian banks calculate borrowing power?
Lenders calculate your net income after tax, then determine how much of that income can service mortgage repayments after living expenses and existing debts. Crucially, repayments are stress-tested at the actual loan rate plus the APRA 3% buffer. The result is your estimated maximum borrowing capacity.
What is the APRA serviceability buffer?
APRA requires lenders to test your ability to repay at the loan rate plus 3%. So a 6.5% loan is assessed as if the rate were 9.5%. This buffer was introduced to reduce the risk of borrowers defaulting if rates rise. It significantly constrains borrowing power — especially at higher loan amounts — but provides an important safety margin.
How much can I borrow on a $120,000 salary?
With a $120,000 gross income, minimal expenses, no existing debts, and current rates around 6.5%, you could typically borrow approximately $550,000–$650,000. This varies significantly based on your living expenses, any existing debts, and the specific lender. Enter your figures above for a personalised estimate.
Does having credit card debt reduce borrowing power?
Yes — significantly. Lenders typically assess credit cards based on the credit limit (not the outstanding balance), using an assumed minimum repayment of 3% of the limit per month. A $10,000 credit card limit reduces your assessed monthly repayment capacity by $300/month, which can reduce borrowing power by $50,000 or more. Reducing or cancelling unused credit card limits before applying improves borrowing power.
Why does borrowing power vary between lenders?
Each lender applies different internal benchmarks for living expenses (HEM), income treatment policies, and credit assessment rules. This can result in materially different borrowing capacity — sometimes varying by 20–30%. A mortgage broker who can access multiple lenders is valuable for finding the best fit for your circumstances.
Does the calculator include stamp duty?
No. The maximum property price shown assumes your borrowing power covers the loan portion only (80% of the purchase price). You will need additional funds for stamp duty, conveyancing, building inspections, and other purchase costs. Use our state-specific
Stamp Duty Calculator to estimate these costs for your state.
How can I increase my borrowing power?
Key ways to increase borrowing power include: reducing or cancelling credit card limits and other debts, lowering declared living expenses (accurately), adding a co-borrower, increasing your income (including bonuses or rental income), or choosing a lender whose policies better suit your income type. A larger deposit also reduces the loan amount needed without affecting borrowing power calculations directly.