Your borrowing power is the maximum amount a lender is likely to approve for a home loan, based on your income, expenses, existing debts and household situation. This calculator gives you a fast, indicative estimate of that figure, plus an estimate of the monthly repayments that go with it.
It’s a starting point for your research, not a loan approval. Every lender applies its own credit policy on top of the same broad inputs, so your actual borrowing capacity with a specific bank may come in higher or lower than this estimate. Treat the result as a planning tool, not a guarantee.
You enter:
- Joint income and dependents, whether you’re applying alone or with a partner, and how many dependents you support
- Net salary 1 and net salary 2, take-home pay for each applicant
- Other income, rental income, bonuses, or other regular earnings
- Annual expenses, your household’s regular living costs
- Car loan, credit card and other repayments, existing debt commitments
- Interest rate, loan term and interest rate buffer, the loan terms used to test your repayment capacity
The calculator returns an approximate loan amount and the estimated monthly repayments on that loan.
Numbers help more than definitions, so here’s a plausible household worked through step by step. This is illustrative only, your own figures will produce a different result.
The household: a couple with one dependent.
Step 1, Work out surplus income. Combined net income of $130,000, less $42,000 in living expenses and $9,600 in existing debt repayments, leaves $78,400 a year (about $6,533 a month) available to service a new loan.
Step 2, Apply the buffer. The calculator doesn’t test that $6,533 a month against the real 6.29% rate. It tests it against 6.29% + 3 percentage points = 9.29%, the rate APRA requires lenders to use when checking you could still afford repayments if rates rose.
Step 3, Solve for the loan amount. At an assessment rate of 9.29% over 30 years, a monthly repayment capacity of $6,533 supports a loan of roughly $790,000. That’s the approximate figure the calculator would return.
Step 4, What the real repayments look like. At the actual 6.29% rate (not the buffered one), monthly repayments on a $790,000 loan would be around $4,890, well under the household’s $6,533 surplus. That gap is deliberate: it’s the cushion the buffer builds in.
Interest rate buffer. This is the extra percentage APRA requires lenders to add to the loan’s actual interest rate when they test whether you could still afford your repayments. It’s not a fee or a rate you actually pay, it’s a stress test. As of August 2026, APRA’s mortgage serviceability buffer sits at 3 percentage points, a level it has held since October 2021 and most recently reconfirmed in July 2025 (APRA). Individual lenders can apply a higher buffer at their own discretion, but 3 points is the regulatory floor.
Borrowing power. The maximum a lender will approve, based on your income, expenses, liabilities, dependents and credit history, tested against the buffered interest rate above. It’s distinct from a pre-approval, which is a lender’s more formal (and usually more conservative) assessment after you’ve submitted documentation.
Because the buffer is added on top of the loan’s actual rate, borrowing power moves in the opposite direction to interest rates, and it can move by more than people expect.
The Reserve Bank of Australia’s cash rate sat at 4.35% p.a. following its 11 August 2026 board meeting, after three separate rate increases earlier in 2026 (RBA). Advertised variable owner-occupier home loan rates have followed the cash rate up, averaging around 6.92% p.a. as at early August 2026, even though competitive advertised rates sit noticeably lower (Finder).
Using the worked example above: if the applicable rate rose from 6.29% to 7.29%, a single percentage point, the assessment rate climbs from 9.29% to 10.29%. Holding the same $6,533 monthly surplus, that reduces the maximum loan from roughly $790,000 to around $727,000, an 8% drop in borrowing power from a 1-point rate rise, before your income or expenses have changed at all.
The reverse is also true. When rates fall, the same surplus supports a larger loan, because both the real repayment and the buffered assessment rate drop together. This is why it’s worth re-running the calculator whenever your lender’s rate changes, rather than relying on a figure from months ago, compare current offers across lenders with our Home Loan Interest Rate Comparison Calculator.
Once you have an estimate, the practical next step is matching it against real listing prices in the suburbs and property types you’re considering, rather than assuming your borrowing power translates directly into what you can buy in your preferred area. Median prices, unit versus house pricing, and the mix of stock on the market vary enormously between suburbs, even within the same city. Cross-checking your borrowing power estimate against current suburb-level data helps you shortlist realistic options before you start inspecting properties.
Each dependent increases the living-expense benchmark a lender applies to your application, which reduces the surplus income available to service a loan. The reduction isn’t a flat per-child fee, it reflects a broader household expense estimate, but more dependents generally means a lower borrowing power, all else being equal.
Often, yes. Investment loans can attract a slightly higher interest rate than owner-occupier loans, and lenders typically only count 70–80% of expected rental income toward serviceability (to allow for vacancies and costs). Both factors can reduce the loan amount you’re approved for compared with buying a home to live in, even at the same price point. Model the full rental cash flow picture, not just the discounted serviceability figure, with our Investment Property Cash Flow Calculator.
It can go either way. An existing investment property adds to your liabilities (its mortgage repayments count against you) but may also add rental income, which counts in your favour, generally at a discounted rate as above. The net effect depends on the property’s equity, rental yield, and remaining loan balance.
Generally, yes. A joint application combines two incomes, which usually increases borrowing power, but it also combines both applicants’ expenses and debts, which works the other way. The net effect depends on the specific numbers involved.
Does a borrowing power estimate guarantee loan approval? No. It’s an indicative figure based on the inputs you provide. Actual approval depends on a full application, credit check, and each lender’s own policies.
What’s the difference between borrowing power and pre-approval? Borrowing power is a quick, self-serve estimate. Pre-approval (sometimes called conditional approval) is a formal assessment by a specific lender after you’ve submitted payslips, bank statements and other documentation, it’s more reliable but takes longer.
Why did my borrowing power drop even though my income hasn’t changed? The most common cause is a change in the assessment rate, either your lender’s advertised rate moved, or the underlying cash rate environment shifted. Because the interest rate buffer is applied on top of the rate, small rate changes can produce a larger swing in borrowing power than you’d expect.
Does using this calculator affect my credit score? No. It’s a general estimate that doesn’t involve a credit check or an application with any lender.
How often should I re-check my borrowing power? Whenever your income, expenses or debts change materially, and periodically while rates are moving, a few months’ gap can shift the result noticeably in either direction.
Can self-employed borrowers use this calculator the same way? You can enter an estimate of your income, but be aware that lenders typically average self-employed income over one or two financial years and may apply extra scrutiny to that figure. Speak to a broker or lender directly for a more accurate picture.
This calculator and the information on this page provide general estimates only and do not constitute financial, credit or taxation advice. Figures are indicative and may not reflect your actual borrowing capacity with any specific lender. Always confirm current rates, fees and eligibility with a licensed mortgage broker, lender, or financial adviser before making a decision.
