🏦 Borrowing Capacity Calculator
Get a rough estimate of how much a bank might lend you based on your income, debts, and living expenses.
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Debts & Commitments
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Banks stress-test at ~3% above this rate
How lenders calculate your borrowing capacity
Banks don't just look at your income when deciding how much to lend you — they run a detailed assessment of your financial position, expenses, and ability to service the loan if rates rise.
The most important rule is the serviceability buffer, set by APRA (the banking regulator). As of 2021, lenders must assess your ability to repay at your actual interest rate plus 3%. So if you're borrowing at 6%, they test whether you could afford repayments at 9%. This significantly reduces the maximum loan size compared to what the headline repayment calculation suggests.
Common borrowing capacity killers that people don't realise:
- Credit card limits: Lenders assume you could max out every card. A $20,000 credit limit — even if you never use it — can reduce your borrowing capacity by $60,000 or more.
- HECS/HELP debt: Your compulsory repayment reduces your net income, lowering your assessed capacity.
- Buy Now Pay Later: Many lenders now factor in BNPL commitments like Afterpay.
- Living expenses: Banks use either your declared expenses or the Household Expenditure Measure (HEM) benchmark — whichever is higher.
🦘 Fun fact: The 3% serviceability buffer was controversial when introduced — the real estate industry argued it was too conservative. But given the 2022–23 rate rises (which took the cash rate from 0.1% to 4.35%), borrowers who were assessed under the buffer were far better protected than those tested under the previous 2.5% floor.