About the Australia Borrowing Power Calculator
This borrowing power calculator estimates how much an Australian lender may be willing to lend you for a home loan. It turns your gross salary (and your partner’s, if you are applying together) into after-tax income using the 2026-27 resident tax rates, the low income tax offset and the 2% Medicare levy, then subtracts your living expenses, existing loan repayments and an allowance for credit card limits to find your monthly surplus.
Australian lenders do not test your loan at the advertised rate. APRA expects banks to check that you could still repay if rates rose by at least 3 percentage points, so the calculator assesses your surplus at the loan rate plus a serviceability buffer (3% by default) and works out the largest principal-and-interest loan that surplus could repay over your chosen term.
Use it before you speak to a broker, when deciding whether to pay off a car loan or cancel an unused credit card, or to see how a rate change moves your limit. It is an estimate: real lenders use the higher of your declared expenses and a benchmark such as the Household Expenditure Measure, shade bonus and rental income, and apply their own credit policies.
With the default inputs, the estimated borrowing power is $546,840.21. Change any value above to recalculate instantly.
How to use the australia borrowing power calculator
- 1Enter your gross annual salary and, for a joint loan, your partner’s.
- 2Enter realistic monthly living expenses and any existing loan repayments.
- 3Add the total limit of every credit card you hold, even if the balance is zero.
- 4Set the interest rate you expect and keep the buffer at 3% unless your lender uses more.
- 5Read your estimated borrowing power and use the chart to see how rates change it.
Formula and method
Each applicant’s gross income is converted to after-tax income with the 2026-27 resident rates (nil to $18,200, 15% to $45,000, 30% to $135,000, 37% to $190,000, 45% above), less the low income tax offset, plus the 2% Medicare levy. Monthly living expenses, existing repayments and 3.8% of total credit card limits are subtracted to give the surplus available for a home loan repayment.
That surplus is treated as the maximum monthly repayment at the assessment rate — your interest rate plus the serviceability buffer — and the present-value-of-an-annuity formula converts it to the largest principal-and-interest loan over the term. The repayment you would actually make at the real rate is lower, which is the safety margin the buffer is designed to create.
- S
- Monthly surplus available for the new loan repayment
- i
- Monthly assessment rate ((interest rate + buffer) ÷ 12 ÷ 100)
- n
- Number of monthly repayments (term × 12)
Worked examples
Single buyer on $120,000
A $120,000 salary attracts $26,520 of income tax and a $2,400 Medicare levy, leaving $7,590 a month. Subtracting $3,000 of living costs and $190 for a $5,000 card limit leaves a $4,400 surplus. Repaid at 9% (6% + 3% buffer) over 30 years, that supports about $546,840, which would cost $3,279 a month at the real 6% rate.
Couple on $95,000 and $70,000 with a car loan
Combined after-tax income is $10,930 a month. After $4,200 of expenses, a $600 car repayment and $380 for $10,000 of card limits, $5,750 is left. At an 8.8% assessment rate over 30 years that supports roughly $727,600.
Same single buyer, 25-year term and no cards
Removing the card limit adds $190 to the monthly surplus, but shortening the term to 25 years means each dollar of repayment supports less loan, so borrowing power ends up almost unchanged at about $546,950.
Frequently asked questions
How do Australian banks calculate borrowing power?+
They start from your after-tax income, subtract the higher of your declared living expenses and a benchmark such as HEM, subtract existing debt repayments and an allowance for credit card limits, then test the remaining surplus against a repayment at your rate plus a buffer of at least 3%.
What is the serviceability buffer?+
It is an extra margin added to the loan rate when a lender checks whether you can afford the repayments. APRA expects authorised lenders to use a buffer of at least 3 percentage points, so a 6% loan is assessed as if the rate were 9%.
Why do credit card limits reduce my borrowing power?+
Lenders assume you could run each card up to its limit, so they count a monthly commitment of around 3% to 3.8% of the limit even if you pay the card off every month. Closing unused cards before applying can noticeably raise your borrowing capacity.
Does a longer loan term increase how much I can borrow?+
Yes. Spreading repayments over 30 instead of 25 years lowers the repayment for each dollar borrowed, so the same surplus supports a larger loan — but you pay much more interest over the life of the loan.
Is borrowing power the same as what I should borrow?+
No. It is the maximum a lender may approve. A comfortable loan leaves room for rate rises, children, job changes and savings, so many buyers borrow well below their limit.
Results are estimates for educational purposes and are not financial advice. Rates, fees and terms vary — confirm with your lender or a licensed advisor before making decisions.