Borrowing Power Calculator (Net Income)

What this calculator does

An estimate of how much a lender might let you borrow, based on your income, living expenses, existing debts and the loan term. It is a starting point, not a pre-approval.

Reading the result

Lenders subtract your living costs and commitments (credit cards, car loans, HECS), then test whether you could still afford repayments if rates rose – they currently assess you at around 3% above the actual rate. That buffer is why your borrowing power is lower than a simple income multiple suggests.

Example

A couple earning $180,000 combined with modest expenses and no other debts might borrow around $850,000 to $950,000. Add a $20,000 car loan and a couple of credit cards and that can fall by $80,000 to $120,000 – debts hurt borrowing power more than most people expect.

Why the bank tests you at a rate you are not paying

Every Australian lender has to check that you could still afford the loan if rates climbed. The regulator, APRA, sets that safety margin at 3 percentage points above the rate you are actually offered, and it has been at 3 since 2021.

So on a 6.10% loan the bank does its sums at 9.10%. That single rule is why borrowing power feels so much tighter than people expect. A borrower with $4,223 a month spare can service about $520,000 at 9.10%, but the same money would service around $696,000 at 6.10%. The gap of roughly $176,000 is the buffer doing its job.

It is not the bank being difficult. It is a stress test, and it is the reason very few Australian borrowers got into trouble when rates rose sharply.

The four things that move the number most

• Living expenses. Every dollar a month you spend is roughly $123 less you can borrow over 30 years at a 9.10% test rate. Cut $500 a month and you add about $61,000 in borrowing power.
• Credit card limits, not balances. Lenders assess the limit as though it were fully drawn, usually costing about 3.8% of the limit each month. A $20,000 limit you never touch still reduces what you can borrow by roughly $94,000.
• Car and personal loans. These come straight off the surplus. A $600 a month car loan costs you around $74,000 of borrowing power.
• How your income is counted. Base salary counts in full. Overtime, bonuses, commission and rent are usually counted at somewhere between 50% and 80%, and casual income often needs a longer history. Lenders differ more here than anywhere else.

Why two banks give you two different answers

The buffer is the same everywhere. Almost nothing else is.

Each lender sets its own minimum living-expense benchmark and uses the higher of that figure and what you declare, so a frugal applicant does not always get credit for being frugal. Each has its own rules on overtime, second jobs, trust income and self-employed averaging. Some assess HECS as a permanent commitment, others ignore it when the balance is nearly cleared. Some count your existing home loan at the buffered rate too.

The result is that the same file can produce a $200,000 spread between the tightest and most generous lender. That spread, not the rate, is often what decides whether a purchase happens.

What this calculator does not know

• Your deposit. Borrowing power is only half the question — you also need the deposit and the costs on top, and lenders cap how much of the price they will lend.
• Lenders mortgage insurance, which applies under a 20% deposit and gets added to the loan.
• HECS or HELP debt, child support, and school fees, all of which lenders treat as commitments.
• Which lender you go to, which as above is the single biggest variable.

Once you know roughly what you can borrow, the next number to look at is what it costs each month. Our loan repayment calculator works that out, and lets you test what a rate rise would do to the repayment.

Questions people ask

Is this a pre-approval?

No. A pre-approval is a lender assessing your actual documents and putting its name to a number. This is an estimate built from figures you typed in.

Why is my result lower than a bank’s own calculator?

Usually the living-expense figure. Bank calculators often use a low default benchmark, while this one uses whatever you enter. Enter what you genuinely spend and the answer gets more honest, not more flattering.

Does paying off my credit card help?

Only if you close the account or reduce the limit. Lenders assess the limit, not the balance, so a paid-off card with a $20,000 limit still counts against you.

Does a longer loan term let me borrow more?

Yes, a little, because the required repayment is smaller. Thirty years is the standard maximum for owner-occupiers. The trade is more interest over the life of the loan.

Do two incomes double what I can borrow?

No. Two incomes bring two sets of living expenses and often dependants, and tax is worked out separately on each. In the example above a second $90,000 income adds roughly $395,000, not the full amount the first income supported.