Borrowing PowerCalculator

How this borrowing power calculator works

This borrowing power calculator gives you an estimate of how much you may be able to borrow for a home loan in today's lending environment. It looks at your income, living expenses and debts to work out a realistic home loan limit based on common lender serviceability rules used in Sydney, the Hills District and across NSW.

While this tool is a great starting point, every bank and lender has slightly different credit policy. Things like overtime, bonuses, casual income, family benefits, rent, credit card limits and existing loans can change your borrowing capacity from one lender to the next. That's where working with an experienced mortgage broker can make a significant difference.

• Get a quick estimate of your maximum home loan borrowing capacity
• Understand how income, expenses and debt affect how much you can borrow
• Compare different scenarios before you speak with a bank
• Use the result to set a realistic price range for your property search

What affects your borrowing power?

Borrowing power is determined by how much surplus income you have after living expenses and existing debt repayments. The main factors lenders look at are:

• Income: Lenders accept PAYG salary, self-employed income (usually averaged over two years), rental income (typically at 70–80%), overtime and bonuses (if consistent), and government benefits such as Family Tax Benefit. The type and stability of income matters — some lenders are more generous with certain income types than others.
• Living expenses: Lenders apply the Household Expenditure Measure (HEM) as a minimum benchmark. If your declared expenses are higher than HEM, they use your figure. More dependants = higher HEM = lower borrowing power.
• Existing debts: Every debt reduces what you can borrow. Credit cards are assessed at the full limit (not balance), car loans at their repayment, and HECS-HELP based on the mandatory repayment rate for your income. Clearing debts before applying can substantially increase your capacity.
• Number of dependants: Each dependant increases the HEM benchmark lenders apply, reducing net surplus income. Lenders treat different household structures differently.
• LVR (loan-to-value ratio):Borrowing above 80% of the property value triggers Lenders Mortgage Insurance (LMI) and may restrict which products and lenders are available to you, though LVR doesn't directly cap your borrowing capacity.
• Serviceability buffer: APRA requires lenders to assess your repayments at your contract rate plus 3%. This means if your loan rate is 6%, repayments are stress-tested at 9% — which can significantly reduce the approved loan amount compared to face-value calculations.

How do lenders calculate your borrowing capacity?

The serviceability assessment works like this: lenders take your verified gross income, subtract the HEM living expense benchmark (or your declared expenses if higher), subtract repayments on all existing debts, and then calculate the maximum loan amount whose stressed repayment fits within what's left.

Different lenders apply different HEM tiers based on household size, postcode and income level. They also shade or discount certain income types — for example, one lender may accept 100% of overtime while another only accepts 50%. This is why the same borrower can get very different results from different lenders, and why using a mortgage broker who knows each lender's policy in detail can make a real difference to your outcome.

For first home buyers in particular, understanding the serviceability calculation early helps you plan — whether that means reducing debts, saving a larger deposit, or timing your application to coincide with a pay rise.

How to improve your borrowing power

If the calculator shows a lower amount than you hoped for, there are often practical ways to increase your borrowing power. Some strategies include:

• Paying down or closing personal loans, car loans and credit cards
• Reducing credit card limits you don't use — even a $5,000 limit reduction can add $20,000+ to your maximum loan
• Reviewing your day-to-day spending to reduce declared living expenses
• Choosing a lender whose policy is more favourable for your income type
• Applying with a co-borrower to combine incomes
• Considering a longer loan term to reduce the assessed monthly repayment

The right approach depends on your goals and timeframe. Use our loan repayment calculator to see how different loan sizes translate to monthly repayments, and book a free strategy call to find the most favourable lender for your situation.

Borrowing power calculator FAQs