How much can I borrow for a home loan in Australia?

It is the smallest of four separate limits: what your surplus income can service at the assessment rate, the debt-to-income cap, the maximum loan-to-value ratio, and what your deposit can reach after purchase costs. The free Borrowing Capacity Calculator at https://tool.adjiebrotots.com/borrowingcapacity/ works out all four and shows which one is holding you back.

Why does the bank assess my home loan at a higher rate than the one I am offered?

APRA requires lenders to add a serviceability buffer of at least 3.00 percentage points to the product rate, and most lenders also apply a floor of roughly 5.00 to 5.75 percent. Your repayment capacity is tested at whichever is higher. The calculator at https://tool.adjiebrotots.com/borrowingcapacity/ applies both and shows the assessment rate it used.

What is HEM and why does it override the expenses I declare?

HEM is the Household Expenditure Measure, a benchmark for basic living costs that scales with household size and income. Lenders take the higher of your declared expenses and HEM, so declaring a very low figure does not increase your borrowing capacity. It excludes rent, mortgage repayments and debt repayments, which are counted separately.

Does my credit card limit affect my borrowing capacity even if the balance is zero?

Yes. Lenders assess credit cards and lines of credit on the total limit, not the balance, usually at 3.0 to 3.8 percent of the limit per month. Closing or reducing an unused limit before you apply can lift your capacity noticeably. You can test the effect at https://tool.adjiebrotots.com/borrowingcapacity/.

Borrowing Capacity Calculator (Australia)

Borrowing capacity

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Binding constraint

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Max purchase price

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Assessed repayment

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Income cover (NSR)

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Left each month (UMI)

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Capacity across the income range

Hover the chart to read every cap at a given income.

The four caps

Each limit is the largest loan that cap allows, in dollars. Your borrowing capacity is the smallest of the four.

Serviceability build-up

Dollars a month and a year. Amounts taken off income carry a minus sign.

Income shading

Dollars a year. Each stream counts at its shading, so the assessable figure can sit below what you earn.

Monthly commitments

Dollars a month, as the lender assesses them. A facility closing at settlement carries a minus sign.

What this assumes

One common lender approach, not any bank's policy. Shading, HEM, the buffer, the floor and the caps all differ between lenders, so treat the answer as a guide, not a pre-approval.
Income counts at its share. Simple counts one gross figure in full; Detailed counts each stream at the share you set.
Tax is the resident scale for the year you pick, with LITO, the Medicare levy, the surcharge without private hospital cover, and the study loan when you deduct it as tax. Two applicants are taxed as two people on the income split.
Living costs are the higher of what you declare and HEM for your household, income band and city.
Other loans are reassessed at the higher of their rate plus the buffer and the lender floor, over the term left. Cards and lines of credit count on the limit, not the balance.
The new loan is tested at the higher of your rate plus the APRA buffer and the lender floor, as principal and interest over the term less any interest only period, keeping the minimum left each month (UMI).
Capacity is the lowest of four caps: serviceability, debt to income, loan to value and deposit. The most you could pay is that loan plus your deposit, after stamp duty and costs when the deposit is entered as an amount.
Stamp duty is the share or amount you enter. State concessions and first home grants are not worked out for you.

Borrowing Capacity

Capacity across the income range ?