Australian Borrowing Power Calculator
APRA +3.00% Serviceability Buffer • HEM Living Expense Benchmark • Credit Card 3.8% Limit Liability
Applicant Income & Commitments
Banks assess borrowing power on net disposable income tested at a +3% interest buffer.
If declared living costs are lower than the statutory HEM benchmark, lenders automatically override with HEM.
Tested at the APRA mandated serviceability rate across a 30-year loan term.
Interest Rate Sensitivity Matrix
How your maximum borrowing power shifts if market interest rates increase or decrease.
| Market Rate Shift | Tested Buffer Rate | Max Borrowing Capacity | Change in Capacity |
|---|
How Australian Banks Calculate Borrowing Capacity
The APRA +3.00% Serviceability Buffer
The Australian Prudential Regulation Authority (APRA) mandates that all authorized deposit-taking institutions (ADIs) assess a borrower’s ability to repay a home loan at an interest rate at least 3.00 percentage points higher than the actual contractual product rate. Even if your mortgage is offered at 6.15%, your bank will evaluate your household cash flow as if the loan were priced at 9.15%.
The Household Expenditure Measure (HEM) Trap
Lenders cannot rely solely on the living expenses you declare on your mortgage application. Instead, they cross-reference your figures against the Melbourne Institute’s Household Expenditure Measure (HEM), a statistical benchmark based on applicant income, marital status, and number of children. If you declare $1,500/month but the HEM benchmark is $2,200/month, the bank will automatically use $2,200, reducing your borrowing power.
Next Steps & Related Australian Calculators
Strengthen your financial plan with these interconnected statutory computational models.
Australian Mortgage & Offset
Test repayment scenarios with principal & interest vs interest-only.
First Home Guarantee (FHG)
Reduce required deposit to 5% with government backing and zero LMI.
Stamp Duty Calculator
Factor state property transfer taxes and FHB exemptions into your budget.
Credit Card Payoff Calculator
Reducing unused credit limits significantly boosts home loan borrowing capacity.
Frequently Asked Questions
Why does an unused credit card reduce how much I can borrow? +
Under Australian regulatory underwriting rules, banks must assume you will max out your credit cards. Regardless of whether you pay off your balance every month, lenders assess 3.0% to 3.8% of the total approved credit limit as an ongoing monthly debt liability. A $10,000 credit card limit is assessed as a ~$380/month repayment, which directly strips approximately $45,000 to $50,000 from your borrowing capacity.
What is a high Debt-to-Income (DTI) ratio? +
Debt-to-Income (DTI) is calculated by dividing your total debt (including the new mortgage, credit cards, and personal loans) by your gross annual income. APRA considers a DTI ratio of 6.0x or higher to be high risk. Most major banks apply stricter underwriting or hard caps once a borrower crosses 6x DTI.