Borrowing Power Calculator

How lenders work out your borrowing power

Every lender runs the same basic sum: assessable income, less assessed living expenses, less commitments, less the repayment on the new loan stress-tested at roughly 3% above the actual rate. Whatever is left over is your surplus, and lenders want it comfortably positive. This is why two households on the same income can be offered amounts $150,000 apart — the differences sit in how each lender treats income, expenses and existing debts, not in the headline rate.

Income shading is the biggest variable. Base PAYG salary is usually taken at 100%, but overtime, bonuses and commissions are commonly shaded to 80%, rental income to 80%, and casual income may need six to twelve months of history. Self-employed applicants are typically assessed on two years of tax returns, with some lenders averaging and others using the most recent (lower or higher) year.

Boost your borrowing power

Paying down or closing credit cards and personal loans, reducing living expenses, and consolidating debts can all lift how much a lender will offer. The right lender choice matters too — borrowing power can vary by tens of thousands between lenders for the same applicant.

• Close unused credit cards. Lenders count roughly 3.8% of the limit as a monthly commitment even if the balance is zero — a $15,000 limit can cost you around $70,000 of borrowing power.
• Clear small personal loans and buy-now-pay-later. A $600 monthly car loan repayment can reduce capacity by well over $80,000.
• Get your declared expenses right. Lenders use the higher of your declared expenses and the HEM benchmark, so overstating hurts you unnecessarily.
• Extend the loan term. A 30-year term rather than 25 lowers the assessed repayment and lifts capacity, at the cost of more total interest.
• Choose the right lender. HECS treatment, shading rules and buffer policies differ meaningfully between banks and non-banks.

Worked example

A couple earning $95,000 and $78,000 with one dependent, a $20,000 credit card limit and a $480 monthly car loan were quoted about $720,000 by their own bank. After closing the card and paying out the car loan from savings, the same couple was assessed at roughly $880,000 with a lender that shaded their overtime at 80% instead of excluding it. Nothing about their income changed — only their commitments and the lender's policy.

Why this estimate is only a starting point

This calculator uses generalised assumptions for the assessment buffer, benchmark living expenses and debt treatment. Your real capacity depends on the individual lender's HEM table, postcode restrictions, HECS balance, dependants and how your income is structured. Use the figure here to set a realistic search range, then confirm it with a broker before you make an offer.

Keep reading

• Borrowing power and income guide.
• How much can I borrow on my income? — worked figures by salary.
• Nine ways to improve your borrowing power.
• How HECS debt affects your home loan.
• Income annualisation calculator — for casual and variable income.