About this calculator
Since October 2021, APRA has required Australian lenders to test every new borrower at an interest rate at least 3 percentage points above the loan's actual rate — ignoring honeymoon discounts — and APRA confirmed the buffer unchanged in its July 2025 and May 2026 macroprudential statements. At a 6% loan rate you are therefore assessed at 9%, on top of a floor rate each bank sets itself. That single rule is why the figure a lender quotes is so much lower than the loan whose repayments you could comfortably make today: this calculator applies the buffer first, exactly as the assessment does.
The second quiet killer is living expenses. Lenders compare your declared expenses against the Household Expenditure Measure (HEM) — a benchmark built from ABS survey data by household type and income — and use whichever is higher. The official HEM table is licensed to lenders and is not published, so the defaults here are indicative benchmarks modelled publicly from the same ABS data, interpolated across income: a single adult on $120,000 is benchmarked at about $25,800 a year. Enter your own figure and it is used instead — but if it is far below the benchmark, expect the lender to use theirs. Credit cards are the third trap: commitments are assessed on your total card LIMITS at roughly 3.8% a month, whether the cards are used or not.
How to use it
- Enter gross incomes (before tax). The calculator converts them to take-home pay using FY2026-27 resident tax rates, the 2% Medicare levy and the low-income offset.
- Pick your household type and either enter your real monthly living expenses or leave 0 to use the HEM-style benchmark for your household and income.
- Enter total credit-card limits (not balances) and other monthly commitments — car loans, HECS, child support.
- Set the loan rate and your saved deposit; the buffer defaults to APRA’s 3 points.
- Read the maximum loan at the assessment rate — and the scenario table to see what the buffer itself costs you.
The formula
This is the lender’s logic run backwards: the assessment fixes the largest repayment your budget can carry at the buffered rate, and the annuity formula inverts that payment into a loan. Tax uses FY2026-27 ATO resident brackets, the Medicare levy phase-in and LITO; other income is shaded to 80% before it counts, because lenders discount rent and bonuses.
Worked example
A single applicant on $120,000 with $10,000 of credit-card limits and a $100,000 deposit: take-home pay is $91,080 a year ($7,590 a month) after $28,920 of tax and Medicare. The HEM-style benchmark counts $25,800 a year of living expenses ($2,150 a month) and the card limits count as $380 a month, leaving a $5,060 monthly surplus. Tested at 9.00% (6% + APRA’s 3-point buffer) over 30 years, that supports a loan of about $628,866 — a property around $728,866. Without the buffer the same surplus would carry about $843,966: the stress test quietly removes roughly $215,000 of borrowing power.
Sources: APRA APG 223 / APS 220 serviceability buffer of 3 points (in force since October 2021, confirmed unchanged in APRA’s July 2025 and May 2026 statements); ATO FY2026-27 resident tax rates and Medicare levy; living-expense defaults are indicative HEM-style benchmarks modelled from ABS Household Expenditure Survey data — the official Melbourne Institute HEM table is licensed to lenders and not published. Last updated: October 2026.
Frequently asked questions
What is the APRA serviceability buffer?
A margin APRA requires lenders to add when assessing whether you could still afford the loan if rates rise: the assessment rate must be at least your loan rate + 3 percentage points (since October 2021; it was 2.5 points before). APRA reviewed it in 2025 and again in 2026 and kept it at 3 points. Banks must also apply an interest-rate floor of their own setting, which is why two lenders can assess the same borrower at different effective rates.
What is HEM and why does it override my real expenses?
The Household Expenditure Measure is a statistical benchmark of basic living costs by household type, location and income, derived from the ABS Household Expenditure Survey and updated for inflation. Lenders must use the higher of your declared expenses or HEM — it exists because borrowers systematically understate spending. The licensed HEM table is not public; the benchmarks in this calculator are publicly modelled estimates from the same ABS data and are labelled as such.
Why do unused credit cards reduce what I can borrow?
Because the lender must assume you could draw the full limit tomorrow. The standard assessment is about 3.8% of each card’s limit per month — a $20,000 limit counts as roughly $760 a month of commitments, which at a 9% assessment rate is worth about $94,000 of mortgage. Closing a card you do not use, or cutting its limit before applying, is the cheapest borrowing-power increase there is.
Why is my result lower than a bank’s online calculator?
Bank calculators are marketing tools with gentler defaults: many use your entered expenses without a HEM floor, shade less income, or quietly test at a lower buffer. This one stacks the conservative choices the way an actual credit assessment does — tax at FY2026-27 rates, benchmark expenses, full card-limit commitments, the full APRA buffer. If a lender offers more, it is usually because they verified lower real expenses from your bank statements.
Does a bigger deposit increase how much I can borrow?
No — it increases the price you can reach, not the loan. Borrowing power is set by income versus expenses at the assessment rate; the deposit simply sits on top (max price = max loan + deposit). A bigger deposit still helps twice elsewhere: it can remove LMI once you pass 20%, and it lowers the repayment at any given price.
What formula does this australia borrowing power calculator use?
Monthly surplus = take-home pay − living expenses − commitments (card limits × 3.8% + other debts). Max loan = surplus × (1 − (1 + r)^−n) ÷ r, with r the monthly rate at (your rate + buffer). This is the lender’s logic run backwards: the assessment fixes the largest repayment your budget can carry at the buffered rate, and the annuity formula inverts that payment into a loan. Tax uses FY2026-27 ATO resident brackets, the Medicare levy phase-in and LITO; other income is shaded to 80% before it counts, because lenders discount rent and bonuses. The worked example on this page applies the formula step by step with real numbers, so you can verify the result by hand.