Lenders take your gross income, apply shading (discounts for variable income, 80% for bonuses, 75% for rental, 90% for self-employed), then subtract your existing commitments and living expenses (the higher of your declared expenses or HEM benchmarks).
They test affordability at the assessment rate, your actual rate plus a 3% APRA buffer. Credit cards are assessed at 3.8% of the total limit regardless of balance.
Every lender calculates differently. The gap between the most and least generous lender can be $100,000+ in borrowing power. That's why using a broker matters.
How this calculator works
This calculator estimates borrowing power the way most Australian lenders assess a home loan application. It starts with your gross annual income, applies income shading to variable income types, deducts an estimated HECS/HELP repayment, then subtracts your existing commitments and living expenses to find the monthly surplus available for loan repayments.
Affordability is tested at an assessment rate equal to your selected interest rate plus a 3 percentage point serviceability buffer, consistent with current APRA guidance. The maximum loan is the amount your monthly surplus can service at that assessment rate over the selected loan term, calculated with the standard amortisation formula and rounded down to the nearest $1,000.
Key assumptions used by the calculator:
- Income shading: PAYG salary counted at 100%, casual or contract income at 80%, self-employed income at 90%, bonus and commission at 80%, rental income at 75%.
- HECS/HELP: an annual repayment is estimated from combined gross salary using income-banded repayment rates from 1% to 10% and deducted from assessed income.
- Credit cards: assessed at 3.8% of the total limit per month, regardless of the balance owing.
- Living expenses: the higher of your declared monthly expenses or a HEM-style floor of $2,400 per month plus $500 per dependant.
- Assessment rate: your selected rate plus a 3% buffer, applied over the selected term with monthly compounding.
This is a general estimate only, not credit advice or a loan offer. Every lender applies its own policy, shading rates, and expense benchmarks, so actual borrowing power varies from lender to lender.