How Australian Lenders Actually Calculate Borrowing Power
Your borrowing power isn't simply your income minus your expenses. Since October 2021, APRA (the banking regulator) has required every Australian lender to stress-test your ability to repay at your actual rate plus a 3 percentage point buffer — so a loan offered at 6% is assessed as if it were 9%. This single rule is the biggest reason approved amounts feel lower than the repayments alone would suggest.
From February 2026, a second constraint was activated: most lenders now cap total borrowing at roughly 6 times your gross household income (the debt-to-income, or DTI, cap). This calculator checks both the buffered serviceability result and the DTI cap, and shows you whichever is lower — exactly how a real lender's assessment works.
What's Included in This Calculation
- Income tax and Medicare levy using the 2025–26 Australian resident tax brackets, to get to real net income, not gross.
- HECS/HELP compulsory repayments, using the 2025–26 marginal repayment system (nil below $67,000, then increasing marginal rates above that).
- Credit card limits assessed at 3% of the total limit per month, regardless of your actual balance — standard practice across Australian lenders.
- The APRA 3 percentage point serviceability buffer, applied on top of your offered rate.
- The 6× gross income DTI cap, checked as an independent ceiling alongside the serviceability result.
Frequently Asked Questions
Every lender applies its own policies on top of the APRA minimums — some use a higher buffer, different income shading for overtime or bonuses, or their own HEM benchmark for living expenses. This calculator models the common baseline rules; your actual result will vary by lender, which is exactly why mortgage brokers who compare multiple lenders can sometimes find you meaningfully more capacity.
Lenders assess the full approved limit, not your balance, because that limit represents debt you could draw on at any time — even if you always pay it off. A $15,000 limit is assessed at roughly $450/month regardless of whether you've ever carried a balance. Reducing unused limits before applying is one of the more effective ways to lift your assessed capacity.
Generally yes, since lenders treat the compulsory repayment as an ongoing commitment that reduces disposable income. Some major banks now disregard HECS debt if it's expected to be paid off within about 12 months, so if you're close to finishing your repayments, it's worth asking your specific lender rather than assuming the full standard treatment applies.
Neither on its own — a real lender checks both and applies whichever is lower, which is exactly what this calculator does. High earners with low expenses are more often constrained by the DTI cap, while those with more debts or dependents are more often constrained by the serviceability (buffer) test.