Borrowing Capacity Calculator Australia 2026

Borrowing capacity depends on your income, expenses, existing debts, and lender criteria. Most Australian lenders cap borrowing at 5-6x your annual income (DTI ratio) and use a serviceability buffer (adding 2-3% to interest rates) to stress test your repayment capacity.

DTI ratio is your total debt divided by annual income. Most Australian lenders limit DTI to 6x (e.g., $600K loan on $100K income). Lower DTI ratios (4-5x) typically indicate stronger financial health and better loan approval chances.

The serviceability buffer is an extra 2-3% that lenders add to the current interest rate when assessing your loan application. This stress tests your ability to afford repayments if rates rise. For example, at 6.5% interest with 3% buffer, lenders assess at 9.5%.

Lenders assess credit cards at 3% of the total limit per month, even if you don't use them or pay them off in full. A $20,000 credit card limit = $600/month assessed expense. Close unused cards or reduce limits to increase borrowing capacity.

Lenders Mortgage Insurance (LMI) protects the lender if you default. It typically applies when your LVR (loan-to-value ratio) exceeds 80%. LMI costs 1-3% of the loan amount and is a one-time upfront fee. Increase your deposit to 20%+ to avoid LMI.

Strategies to boost borrowing power: (1) Reduce/close unused credit cards, (2) Pay off other debts (car loans, personal loans, HECS), (3) Increase your deposit, (4) Apply with a partner/co-borrower, (5) Reduce discretionary spending, (6) Choose a longer loan term (30 years vs 25 years).