How this calculator works

Borrowing power, or borrowing capacity, is an estimate of how large a home loan a lender might consider, based on your income, expenses, existing debts and the interest rate used for the test. It is not an offer, a pre-approval, or a statement of what you should borrow. Two lenders can produce two different figures from the same payslips, because they treat overtime, living costs and other commitments differently.

The Never Lose Interest borrowing power calculator gives a guide to that capacity using the loan rate you enter and a serviceability buffer. This explainer shows what sits behind the estimate, including the 3 percentage point buffer that APRA requires authorised deposit-taking institutions to apply, and the things a calculator cannot see.

This is general information only. It is not personal advice, a loan offer or a credit assessment, and it does not take into account your objectives, financial situation or needs. Using a calculator does not mean a lender will approve a loan. Consider speaking with a licensed finance professional before you borrow.

How do lenders work out borrowing power?

In outline, a lender asks whether you could still afford the loan if rates were higher than the rate on offer, after tax, living costs and your other debts have been allowed for.

A simplified sequence looks like this:

  1. Start with your assessable income. That may be base salary, regular overtime, bonuses, rental income (often at a discounted rate) and other income the lender is willing to count. Casual, self-employed and bonus income is often averaged or discounted.
  2. Subtract tax, the Medicare levy, and any study loan repayment the lender includes. Take-home pay is a better starting point than gross pay. The Never Lose Interest pay calculator explains those deductions.
  3. Subtract living expenses. Lenders generally use the higher of the living costs you declare and a benchmark such as the Household Expenditure Measure (HEM), which is a standardised estimate of household spending. Declaring unusually low expenses will not usually lift your capacity if the benchmark is higher.
  4. Subtract existing debt commitments, including other home loans, personal loans, car loans, rent if it will continue, child support, and a serviceability amount for credit cards and similar limits. Many lenders assess cards and limits using the limit, not just the current balance, so an unused card can still reduce borrowing power. The exact method varies.
  5. What remains is the surplus that could go toward a new loan repayment. The lender then works out how large a loan that surplus could support, not at today's rate, but at a higher assessment rate.

That last step is where the serviceability buffer does most of the work.

What is the serviceability buffer?

APRA requires authorised deposit-taking institutions, which include banks, to assess new mortgages at the actual loan rate plus a buffer of 3 percentage points. APRA confirmed on 28 May 2026 that this buffer remains at 3 percentage points. If the rate on the loan would be 6%, the lender tests whether you could afford the repayments at 9%.

The buffer is a contingency over the life of the loan, not a forecast that rates will rise by 3 percentage points tomorrow. It means the loan you are approved for is usually smaller than the loan you could just service at the current rate.

A repayment-only illustration, using the same principal-and-interest method as the mortgage repayment explainer, shows the size of the gap. These figures assume a 30-year term and a constant rate. They ignore fees, tax and living costs, so they are not a lender's assessment.

  • The monthly repayment on a $600,000 loan is about $3,597 at 6%, and about $4,828 at 9%.
  • If $4,000 a month were available for a repayment, that surplus would support a loan of about $667,000 at 6%, but only about $497,000 when the same surplus is tested at 9%.

In that narrow illustration, the 3 percentage point buffer reduces the loan by around $170,000. A real assessment will also reduce the surplus itself, once living expenses and other debts are deducted, so the final capacity can be lower again.

APRA has also left in place a limit on high debt-to-income lending. In its 28 May 2026 announcement, it said banks may lend up to 20% of new owner-occupied and investment loans at a debt-to-income ratio of six times or more. That is a cap on a bank's new lending book, not a personal borrowing limit, but it is one reason a high-income applicant with large debts may be treated more tightly.

Lenders can apply exceptions to the serviceability buffer in some cases, including some refinances, within their risk appetite. You should not count on being an exception.

What else reduces or increases borrowing power?

The deposit and the loan-to-valuation ratio (LVR). Borrowing power is about serviceability. How much of the property price you can borrow is also limited by the deposit you have, and by whether the lender will accept a higher LVR, often with lenders' mortgage insurance. A strong serviceability result does not help if the deposit is too small for the property you want. Stamp duty and other purchase costs should be allowed for in the cash you need, and are covered in the Never Lose Interest stamp duty explainer. A refinance is a fresh credit assessment, as explained in refinancing a home loan. How borrowing capacity sits beside the decision to rent is covered in buying versus renting.

The loan type. Interest-only loans are often assessed on a principal-and-interest repayment over the remaining term, or another conservative method, rather than on the lower interest-only payment. Investment loans may be treated differently from owner-occupier loans, including how rental income is counted.

Income type. A permanent base salary is usually counted in full. Overtime, commissions, bonuses, short-term contracts and newly started self-employment may be averaged, discounted, or excluded until a longer history is available. A second job may or may not be counted.

HELP and other study loans. A compulsory repayment reduces your net income. Some lenders also treat the debt in other ways. The current HELP thresholds are in the pay calculator explainer.

Guarantors, genuine savings and existing property. A family guarantee can change the LVR, but the loan still has to be serviceable. Equity in an existing property can support a larger loan, or a top-up, if the lender accepts the security and the repayments still fit the surplus.

Rate changes during the application. If advertised rates move while your application is being assessed, the assessment rate (the advertised rate plus the buffer) moves too, and capacity can change before approval.

Why is the calculator different from a lender's figure?

A website calculator uses the numbers you type in, a single rate, and a simplified view of expenses and debt. A lender verifies income, applies its own shading to each income type, uses its own version of living-cost benchmarks, and runs the loan through its credit policy, security valuation and fraud checks. It also looks at your credit history.

If your result is much higher than you expected, treat it as a prompt to check the inputs, especially living expenses and unused credit limits, not as a target to borrow to. Borrowing the maximum a calculator produces can leave little room for a rate rise, a drop in income, or a large unexpected bill, even with the buffer in the assessment.

The government's Moneysmart mortgage calculator includes a "how much can I borrow" function, and it is a useful official cross-check. It is still a model. It does not guarantee that you will be eligible for a loan, and you will need to satisfy the lender's criteria.

If you already know the loan size, the mortgage repayment calculator answers the other half of the question: what the ongoing repayment would be at a given rate and term.

Frequently asked questions

How much can I borrow on my salary?

There is no official multiple of salary that applies to every lender. Capacity depends on the interest rate used for the test, your other income, your living costs, your existing debts, and the lender's policy. Two people with the same salary can have very different borrowing power. Use a calculator for a range, then get a figure from a lender or a licensed finance professional based on verified documents.

Why do I need to pass a test at a higher interest rate than I will pay?

APRA requires banks to apply a 3 percentage point serviceability buffer so that new borrowers have more capacity to keep paying the loan if their circumstances change. You are not charged that higher rate from day one. You are asked to show that the loan would still be serviceable at that higher rate.

Does paying off a credit card increase my borrowing power?

It can, especially if you also reduce or close the limit. If a lender assesses the card on the limit, paying the balance to zero but leaving a large limit in place may not help much. Ask the lender how it treats cards and other revolving credit.

Can I use this calculator as a pre-approval?

No. Pre-approval, or a conditional approval, is a step a lender takes after looking at your documents and, often, at the type of property you intend to buy. A calculator result is not a pre-approval and should not be presented as one.

Will the 2027 property tax changes affect borrowing power?

Lenders assess repayments, income and expenses. Federal tax settings can affect the after-tax cost of an investment loan, especially if a net rental loss can no longer be deducted against salary from 1 July 2027 for many established properties. That is a tax question, not a substitute for the lender's serviceability test. See the Never Lose Interest guide to new builds versus established property after 2027 if you are borrowing to invest.

General information warning

This article, and the Never Lose Interest borrowing power calculator, are general information only. They are not personal financial product advice, a credit guide, or an offer of credit. They do not take into account your objectives, financial situation or needs, and they do not assess your ability to repay a loan. Home loans are a significant commitment. Consider seeking advice from a licensed finance professional before you borrow or refinance.

Sources

Last reviewed: November 2026.