Borrowing Capacity Calculator Australia 2026
Calculate how much you can borrow for a home loan
Free calculator with DTI limits, serviceability stress tests, and LMI estimates. No email required. Instant results.
Your Details
Annual Income
Annual amount
Total Annual Income: $100,000
Monthly Expenses
Lenders assess at 3% of total limits (~$300/month)
Car loans, personal loans, HECS/HELP, etc.
Loan Details
Current variable rates: 6.75% (typical)
Note: This calculator provides an estimate only. Actual borrowing capacity depends on lender policies, credit history, employment status, and other factors. Consult with a mortgage broker for personalized advice.
Enter your details to calculate borrowing capacity.
How Banks Calculate Your Borrowing Power
Australian banks use a rigorous assessment process to determine how much you can borrow. Understanding these criteria helps you prepare your application and maximise your borrowing capacity. Here are the five key factors lenders evaluate:
APRA Serviceability Buffer
The Australian Prudential Regulation Authority (APRA) requires banks to assess your ability to repay at the current interest rate plus a 3% buffer. So if the actual rate on your loan is 6.5%, the bank must test whether you can afford repayments at 9.5%. This buffer protects borrowers against future rate rises and is the single biggest factor limiting borrowing capacity in 2026.
HEM (Household Expenditure Measure)
Banks use the higher of your declared living expenses or the HEM benchmarks for your household size and income bracket. HEM is a statistical measure of median household spending. If your declared expenses are below HEM, the bank will use HEM instead. This means understating your expenses on an application will not increase your borrowing power.
DTI (Debt-to-Income) Ratio
Most banks cap borrowing at 6-7 times your gross annual income. APRA closely monitors loans with a DTI above 6x and considers them higher risk. For example, on a $120,000 income, a DTI of 6x means a maximum loan of $720,000. Some lenders have tightened this to 5x for investment loans.
Existing Debts — The Credit Card Trap
Every $10,000 in credit card limits reduces your borrowing capacity by approximately $30,000-$50,000 — even if the card has a zero balance. Lenders assess the full credit limit as potential debt. HECS/HELP debt, car loans, personal loans, and buy-now-pay-later accounts all reduce capacity further. Closing unused credit cards before applying is the single biggest quick win.
Rental Income Shading
If you already own investment properties, banks will count the rental income — but only at 70-80% of the gross amount. This "shading" accounts for vacancy, maintenance, and management costs. A property earning $600/week will only contribute $420-$480/week to your assessed income. You will need current lease agreements as evidence.
Borrowing Capacity Examples
The table below shows approximate borrowing capacity at different income levels. These estimates assume standard living expenses, no other debts (unless noted), and a 30-year principal and interest loan at approximately 6.5% assessed at 9.5% with the APRA buffer.
| Gross Income | No Debts | $20K Credit Cards | With 1 Investment Property |
|---|---|---|---|
| $80,000 | ~$450,000 | ~$380,000 | ~$500,000 |
| $120,000 | ~$700,000 | ~$630,000 | ~$770,000 |
| $180,000 | ~$1,050,000 | ~$980,000 | ~$1,130,000 |
| $250,000 (couple) | ~$1,400,000 | ~$1,330,000 | ~$1,500,000 |
Note: These are estimates only. Actual borrowing capacity varies by lender, your specific expense profile, and current assessment rates. Use the calculator above for a personalised estimate.
How to Increase Your Borrowing Capacity
If the calculator shows your borrowing capacity is lower than expected, here are eight practical strategies to increase it before your next loan application:
Cancel unused credit cards
This is the biggest quick win. Closing a $15,000 credit card limit can increase borrowing capacity by $45,000 or more.
Pay down personal loans and car loans before applying
Each monthly repayment obligation directly reduces the amount a bank will lend you. Prioritise clearing these debts first.
Reduce living expenses for 3 months before application
Banks check your bank statements. Reducing discretionary spending (dining, subscriptions, entertainment) for the 3-month assessment period demonstrates lower living costs.
Use a longer loan term (30 years vs 25)
A 30-year term reduces the assessed monthly repayment, increasing the amount the bank will approve. You can always make extra repayments later.
Consider interest-only for the investment property portion
Interest-only loans have lower assessed repayments. Some lenders assess IO loans more favourably for investment properties, boosting total capacity.
Add a co-borrower to increase combined income
A partner, spouse, or family member can be added as a co-borrower. Combined income significantly increases borrowing power, even if the co-borrower earns a modest amount.
Show rental income from existing properties with lease agreements
Provide current lease agreements, rental statements, and tax returns showing rental income. Banks count 70-80% of gross rent toward your income.
Choose a lender with more favourable serviceability assessment
Not all lenders assess the same way. Some use lower HEM benchmarks, more generous income shading, or different expense categorisation. A mortgage broker can identify the best lender for your situation.
How the Calculator Works
Enter Your Details
Provide income (yours + partner), expenses, debts, and deposit amount.
Instant Calculation
We calculate max borrowing using lender criteria: DTI limits, serviceability buffer, and stress tests.
See Your Capacity
View max loan amount, property price, LVR, LMI estimate, and cash flow breakdown.
Comprehensive Borrowing Analysis (2026)
- ✓ DTI Ratio Analysis: Checks against typical 6x income limit
- ✓ Serviceability Stress Test: Assesses at current rate + 3% buffer (9.5% for 6.5% loans)
- ✓ LVR & LMI Calculation: Shows loan-to-value ratio and estimated LMI cost if >80% LVR
- ✓ Credit Card Impact: Automatically calculates assessed repayment (3% of limits)
- ✓ Living Expense Estimator: Auto-estimate monthly expenses based on household size (HEM)
- ✓ Cash Flow Breakdown: See monthly income, expenses, loan repayment, and remaining cash
Calculator FAQs
How much can I borrow for a home loan?▼
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.
What is the debt-to-income (DTI) ratio?▼
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.
What is a serviceability buffer?▼
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%.
Why do credit card limits reduce borrowing capacity?▼
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.
What is LMI and when does it apply?▼
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.
How can I increase my borrowing capacity?▼
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).
How much can I borrow on a $100K salary?▼
On a $100,000 gross salary with minimal debts and standard living expenses, you can typically borrow approximately $550,000-$650,000 for a home loan. This assumes a 30-year P&I loan at current rates (~6.5%), assessed at ~9.5% with the 3% serviceability buffer. High credit card limits, car loans, or dependents will reduce this figure. Use our calculator above for a personalised estimate.
Do credit cards affect borrowing capacity even with zero balance?▼
Yes. Lenders assess credit cards based on the total credit limit, not the current balance. They typically assume 3% of the limit as a monthly repayment obligation. For example, a $20,000 credit card limit adds $600/month to your assessed expenses — even if you never use the card. This alone can reduce your borrowing capacity by $30,000-$50,000. Cancelling unused cards before applying is one of the quickest ways to boost your borrowing power.
Can rental income from existing properties help my borrowing capacity?▼
Yes, rental income from existing investment properties can increase your borrowing capacity. However, banks only count 70-80% of the gross rental income (called "income shading") to account for vacancy periods and expenses. For example, if your investment property earns $500/week ($26,000/year), the bank may only count $18,200-$20,800 toward your income. You will need current lease agreements and rental statements to support the income claim.
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