How to use our borrowing power calculator
Here are the details you’ll need to enter:
Total income after tax
Your total household income after tax, either as a weekly, monthly or annual amount. This includes your spouse’s income if you’re borrowing as joint applicants.
Monthly expenses
Monthly living expenses including your household's spending on bills, groceries, and other loans, as well as discretionary costs like dining out and entertainment.
Monthly surplus required
This is the amount you'd like to have leftover each month after your mortgage repayments and other expenses have been deducted (e.g. how much you'd like to be able to put into savings).
Expected loan interest rate
What is the expected home loan interest rate you’ll be charged?
Loan term
How long is your home loan term? (i.e. 25 or 30 years remaining)
After you’ve entered in these details, our calculator will give you an estimate of your borrowing power. By analysing this information, our calculator helps you understand how much you may be able to borrow for a home loan, giving you a clearer picture of your financial options and guiding your property search.
Key factors that impact your borrowing power
Deposit amount
The size of the deposit is a significant factor in determining how much you can borrow. A larger deposit not only increases borrowing capacity but can also lead to more favourable interest rates.
Equity in existing home
For homeowners, the equity in your current property can be leveraged to secure additional borrowing. Usable equity allows you to access funds based on the value of your home.
Total income after tax
Lenders will assess your total income after tax to evaluate your ability to service the loan (i.e. make repayments). Higher income typically results in a greater borrowing capacity.
Living expenses
Your monthly living expenses are crucial in calculating how much disposable income is available for loan repayments. Lower expenses enables you to allocate more of your income towards a mortgage.
Other considerations
Additional factors such as existing debts, credit history, your assets and liabilities, how many dependants you have, and the overall economic climate also play a role in determining your borrowing capacity.
Household expenditure measurement (HEM) is a benchmark that lenders use to estimate a borrower’s living expenses during the assessment of home loan applications. It provides a standard measure of typical household spending based on factors like income and family size. Lenders may adjust the HEM to tighten lending criteria in specific scenarios, such as for single-income households, and these adjustments often occur regularly.
How much can you borrow if you have a deposit?
Most lenders in Australia prefer larger deposits when it comes to the property's purchase price and current value. For example, a 20% deposit can increase how much you can borrow compared to just a 5% deposit.
This preference is tied to the loan-to-value ratio (LVR), which is crucial for determining your borrowing power. LVR is calculated by dividing the loan amount by the property's value. A lower LVR means you have a smaller loan compared to the property's value, which reduces risk for lenders. Therefore, a higher deposit results in a lower LVR, boosting your borrowing capacity and often leading to better loan terms, such as lower interest rates and fewer fees.
Note: To avoid paying lender’s mortgage insurance (LMI), you'll typically need a deposit of at least 20% of the property's value. LMI is insurance that protects lenders if you default on your home loan, and borrowers with deposits below 20% are considered higher risk.
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