Question 1

How do banks calculate borrowing power?

Accepted Answer

Banks assess your borrowing power by calculating your net income after tax, subtracting living expenses, existing debts, and credit card liabilities. They then determine the maximum loan amount where repayments at a 'serviceability rate' (typically the actual rate plus a 3% buffer) would still be affordable.

Question 2

What is the APRA serviceability buffer?

Accepted Answer

APRA requires banks to assess your ability to repay at an interest rate at least 3 percentage points above the loan's actual rate (with a minimum floor of 5.5%). This ensures you could still afford repayments if rates rise.

Question 3

Does HECS/HELP debt affect borrowing?

Accepted Answer

Yes. Banks count your HECS/HELP repayment as a liability. The repayment amount is based on your income — typically 1-10% of your gross income above the repayment threshold ($54,435 for 2025-26). This reduces your available income for loan repayments.

Question 4

What is a debt-to-income (DTI) ratio?

Accepted Answer

DTI ratio compares your total debt to your gross annual income. Most lenders cap this at 6x your income. Even if your income supports higher repayments, your borrowing may be limited by this ratio.

Question 5

How accurate is this calculator?

Accepted Answer

This calculator provides a reasonable estimate using standard bank assessment methods. Actual borrowing power varies between lenders and depends on factors like employment type, credit history, property location, and individual bank policies. Always get a pre-approval for an accurate figure.

Borrowing Power Calculator

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