How to use the Borrowing Capacity Calculator
Enter what you earn, owe and spend, and see what an Australian lender would likely lend you, and which of its four caps stops it. Every demo on this page is the real tool, running live in your browser. Press Pause on one to try it yourself.
The short version
-
Start from an example
A Quick Start fills every tab with a worked Australian borrower. Change any figure over the top of it.
-
Enter your own
Five tabs in a lender's order: Income, Household, Debts, Loan, Purchase. Each opens Simple; Detailed shows a lender's own settings.
-
Read the answer
The sentence at the top, then Borrowing capacity and the Binding constraint: the smallest of four caps, and the one to lift first.
Nothing is uploaded. Every figure is worked out in your browser, in the eight steps a lender's credit engine runs. This guide is general information, not financial advice, and the tool is not a pre-approval.
The screen
Inputs on the left, the answer beside them, the chart and the working under it. Point at a part in the list to see where it is.
-
Inputs
Quick Start, save and open, then five tabs: Income, Household, Debts, Loan and Purchase. Warnings appear at the foot. The chevrons fold the card to a slim Inputs rail.
-
The answer
One sentence, then six figures: Borrowing capacity, Binding constraint, Max purchase price, Assessed repayment, Income cover (NSR) and Left each month (UMI).
-
The chart
Capacity across the income range: all four caps from 0.4 to 1.6 times your income, your scenario at the centre. Share and β³ sit above it.
-
The working
The four caps, then Serviceability build-up, Income shading, Monthly commitments and What this assumes, each behind a chevron.
Top right, Tour replays a one minute walk through the tool, and Guide opens this page.
Quick Start
Five worked borrowers: Finance Bro, Sydney on $230,000 plus a bonus, a Couple, Melbourne with two children, Average Man, Perth on $110,000, a First home buyer, Brisbane with a thin deposit, and a Self-employed tradie, Adelaide. One click resets every tab and fills it.
On a phone, press Full screen under a demo and turn the phone sideways to read it.
Open the inputs
On a first visit the card is folded to a rail, so the answer has the room. Click Inputs to open it; it stays the way you leave it.
Pick an example
Hover a button to read who it is. A click fills every tab and the answer follows at once.
- Every example can afford its home. Each clears its price with a little to spare, so the first nudge can tip it over. The first home buyer gets there only because Lenders Mortgage Insurance is on.
- No Reset button. Any Quick Start clears the form first, so it is the way back to a clean start.
Income
What you earn, and how much of it a lender counts. Simple takes one gross figure a year, counted in full. Detailed asks stream by stream, each with its Shading: the share a lender counts.
Simple or Detailed
The Detail switch. Finance Bro opens Detailed: $230,000 base salary at 100%, a $90,000 bonus at 80%.
Shade each stream
The box beside each amount. A lender taking only half the bonus cuts capacity from $906,340 to $624,187, while the tax stays on all of it.
Anything else you receive
Tick Rent, dividends or an investment property or Family Tax Benefit, pension or child support and their fields appear.
- I earn as. Employee or Self-employed picks which side of the form counts. Self-employed asks for the two year average profit after tax (NPAT) and add-backs.
- An unticked box means it does not exist. Its fields are zeroed, so a figure left in a hidden group never leaks into the answer.
- Simple and Detailed hand the figure across. Detailed opens with the Simple figure as base salary, and Simple reopens on what the streams add up to.
Household
Who is applying, who depends on you and where you live. It sets the tax, through two taxpayers or one, and the living costs a lender assumes, through the HEM benchmark.
Who is applying
Adults in the household, then the Second applicant's share of income. At 0% the couple's $185,000 is taxed in one name: $12,980 more tax a year and $135,643 less capacity.
Living costs and HEM
Under Declared living expenses a note says whether HEM is used instead. Declare $6,000 a month, above HEM, and it counts: capacity falls to $601,092.
Tax and study loan
Resident tax year sets the lowest bracket. A study loan is deducted as tax or counted as a commitment; the same dollars either way.
- City scales HEM by local living costs without housing, Perth at 100.
- Private hospital cover. Off, and the Medicare levy surcharge applies once income passes its threshold.
Debts
What you already owe and will keep paying. Each repayment comes out of the income the new loan could use; each balance counts against the debt-to-income cap.
Tick what you have
Each box opens its group. A $600 a month car loan takes capacity from $416,250 to $341,009.
A card counts at its limit
Credit card and line of credit limits: the limit, not the balance. Closing the $8,000 card lifts capacity to $379,131.
Detailed
Shows the Assessed monthly rate on cards (3.0% to 3.8%) and the term and type of other home loans.
After settlement
Occupancy, any rent you keep paying, and the Strata, rates and insurance on the new home.
- Other home and investment loans are reassessed at the higher of their rate plus the buffer and the lender floor, as principal and interest over the term left.
- Closing at settlement. A facility you pay out at settlement comes off commitments, and its balance off the debt-to-income cap.
Loan
The rate you are offered and the term. A lender tests you at a higher rate, so the note under the fields says what it is and what else it insists on.
Rate and term
Product rate offered and Loan term. At 6.40% instead of 5.90% the couple is tested at 9.40% and capacity falls to $657,222.
Interest only to start
The test runs over the years left after it ends. Five years of it take capacity to $632,057.
Lender policy
Detailed shows the APRA buffer, the Lender floor, Minimum left each month (UMI) and Minimum income cover (NSR).
- The assessment rate is the higher of the product rate plus the buffer (3.00%) and the floor (5.50%).
Purchase
The home, the deposit and the costs of buying it. This tab sets three of the four caps: debt to income, loan to value and the deposit.
Price, deposit and costs
Purchase price, Deposit funds, Stamp duty and Other purchase costs. The note under the deposit says what is left after costs.
Lenders Mortgage Insurance
On, the lender goes to 95% of the price. Off, it stops at 80%, the $66,000 deposit binds, and capacity falls from $426,671 to $264,000.
Detailed: LVR and DTI
Maximum LVR, the DTI cap and its Income basis, for a lender stricter than the usual.
- An amount or a percentage. Deposit funds as an amount is cash in the bank, with stamp duty and costs paid out of it first. As a percentage of the price it is the down payment, with the costs on top. Switching restates the figure, so the answer stays put.
- Bank valuation (Detailed). The loan to value cap uses the lower of price and valuation.
Read the answer
One sentence, six figures, a chart of every cap, then the working behind each.
The answer
What a lender would likely lend, whether that buys the home you entered, and which cap sets the limit.
Six figures
Binding constraint names the cap and how far the next one sits above it. NSR and UMI say how tight it is.
Every cap across incomes
Hover to read all four at any income. Your capacity is the lowest line at each point.
The four caps
Each limit, its headroom above the answer, and which one binds.
The working
Serviceability build-up runs from gross income to the loan, line by line. Its chevron opens it.
- Max purchase price is the capacity plus the deposit left after costs. In percentage duty mode it reads a little low: enter it as the price to converge.
- Warnings sit at the foot of the inputs: a surplus that covers no repayment, an LVR above 80% without LMI, a debt-to-income ratio past 6, an NSR under its minimum.
- What this assumes lists every figure the answer rests on, in words, for the scenario on screen.
How the numbers work
How an Australian lender sizes a home loan, as this tool does it: every field, where it enters the sums, and what moving it does to the answer.
The model in one picture
A lender asks four separate questions and lends the smallest answer. Can your income repay it? Is the total debt a sane multiple of income? Is the loan a safe share of the property? Does your deposit reach that share?
- Nnet income a month: counted income less tax
- Eliving costs: the higher of declared and HEM
- Kexisting commitments a month
- Uthe minimum left each month (UMI)
- ithe assessment rate Γ· 12
- nmonths tested: the term, less any interest only
- mthe LMI premium, when it is capitalised
- LDTI, LLVR, Ldepthe three hard caps (Purchase)
Serviceability turns a monthly surplus into a loan: the present value of the repayment over the term, at the rate the lender tests you at. At 8.90% over 30 years every $1 a month supports $125.40 of loan, so every $100 a month of commitments costs about $12,540 of capacity.
| Quick Start | Serviceability | Debt to income | Loan to value | Deposit | Binds |
|---|---|---|---|---|---|
| Finance Bro, Sydney | $906,340 | $1,853,000 | $1,080,000 | $1,955,040 | Serviceability |
| Couple, Melbourne | $686,999 | $1,095,000 | $736,000 | $983,072 | Serviceability |
| Average Man, Perth | $416,250 | $652,000 | $448,000 | $621,568 | Serviceability |
| First home buyer, Brisbane | $426,671 | $715,000 | $456,000 | $1,254,000 | Serviceability |
| The same, LMI off | $437,338 | $715,000 | $384,000 | $264,000 | Deposit |
| Self-employed tradie, Adelaide | $541,400 | $922,000 | $624,000 | $1,037,048 | Serviceability |
- Serviceability binds for almost every real borrower. Tested at 8.90%, income runs out well before the other caps. All five Quick Starts land at 3.0 to 3.9 times gross income, far under the 6.0 debt-to-income cap.
- The deposit binds when it is thin. The first home buyer's $66,000 deposit, after costs, supports $264,000 at 80% LVR (four dollars of loan for each dollar down) but $1,254,000 at 95% (nineteen). LMI is what lets the income decide.
- Loan to value binds on a cheap home or a strong income. Average Man sits $31,750 under it; close his $8,000 card and it takes over at $448,000.
- Debt to income binds only for a stricter lender. Set the couple's DTI cap to 3.5 and it does, at $632,500.
Income: what counts, and the tax on it
Two different incomes. The lender counts each stream at its shading. The tax office taxes what you actually earn. So a shaded bonus is a double hit: only part of it counts, all of it is taxed.
- Agross assessable income, a year
- Ytaxable income: every taxed stream in full, plus rental profit and grossed-up dividends
- Ttotal tax, a year (the scale is on the Household tab)
- Gthe negative gearing add-back: marginal rate Γ rental loss
| Field | What it is | In the maths | Raise it |
|---|---|---|---|
| Detail | Simple: one gross figure. Detailed: each stream with its shading. | Simple sets base salary (or NPAT) to the one figure at 100% and every other stream to nil. | which fields count |
| I earn as | Employee or Self-employed. | The side not chosen is zeroed. | which fields count |
| Total employment income | Simple view: gross pay a year before tax, without employer super. Self-employed, it reads Business income you draw on. | In A at 100% and in Y in full. | β² capacity |
| Base salary (PAYG) | Gross base salary, with its shading (100%). | Amount Γ shading in A; full amount in Y. | β² capacity |
| Overtime | Regular overtime, shaded 80% (100% for essential services). | As base salary. | β² capacity |
| Bonus or commission | Shaded 80%; lenders use 50% to 80%. | As base salary: the shaded part is still taxed. | β² capacity |
| Allowances | Non-reimbursable car, shift, travel and site allowances, shaded 80%. | As base salary. | β² capacity |
| Casual or second job | Shaded 80%. | As base salary. | β² capacity |
| Two year average profit after tax (NPAT) | Self-employed income, shaded 100%. | With add-backs Γ shading in A; NPAT alone in Y. | β² capacity |
| Add-backs | Depreciation, one-offs, extra super and wages paid to you: costs that are not cash. | In A at the NPAT shading; never taxed. | β² capacity |
| Shading (each stream) | The share of a stream a lender counts, 0% to 100%. | Multiplies that stream in A only; tax is unchanged. | β² capacity |
| Rent, dividends or an investment property | The box that opens the Investments group. | Unticked, rent, its costs, depreciation, dividends and the outgoings on Debts are all nil. | opens the group |
| Gross rental income | Rent a year before costs, shaded 80% for vacancy and running costs. | Rent Γ shading in A. Rent less costs and depreciation is the rental profit (taxed) or loss. | β² capacity |
| Investment property deductible costs | Interest, fees, rates, strata, insurance and repairs. | Tax only: lower the rental profit in Y, or deepen the loss for G. Never taken off the rent twice. | βΌ tax |
| Depreciation (non-cash) | Claimed on the investment property. | As deductible costs: lowers tax without costing cash. | βΌ tax |
| Allow negative gearing add-back | Some lenders add back the tax a rental loss saves (on by default). | G = the higher earner's marginal rate Γ rental loss. | on: β² capacity |
| Dividends and distributions | Cash received, two year average, shaded 80%. | Grossed up for franking, then Γ shading in A; the grossed-up amount is in Y. | β² capacity |
| Franked portion | The share carrying franking credits at the 30% company rate (100%). | Gross-up = dividends Γ franked share Γ 30 Γ· 70. Counting the credit as income is the same as taking it off the tax. | β² capacity |
| Family Tax Benefit, pension or child support | The box that opens the Government and support group. | Unticked, all three are nil. | opens the group |
| Family Tax Benefit A and B | Counted in full while the youngest child is under the lender's age limit. | Γ shading (100%) in A; not taxed. | β² capacity |
| Centrelink pension or DSP | Age pension, DSP or carer payment (100%). | Γ shading in A; in Y only when taxable. | β² capacity |
| Pension is taxable | Age pension is taxable; DSP below pension age is not. | Adds the pension to Y. | on: βΌ capacity |
| Child support received | Under a court order or binding agreement (100%). | Γ shading in A; tax free. | β² capacity |
Shading is not a tax. Finance Bro's $90,000 bonus at 80% adds $72,000 to counted income, but all $90,000 is taxed at his 47% marginal rate. At 50% shading the bonus counts as $45,000, still taxed in full, and capacity falls by $282,153.
Household: living costs and the tax scale
A lender does not trust a low expense figure. It takes the higher of what you declare and a benchmark for a household like yours, the Household Expenditure Measure (HEM). This tool builds a HEM-style benchmark from household size, income and city.
- b$1,850 for one applicant, $2,750 for two
- ddependants
- cthe city index, Perth = 100
- fthe income band on total gross income: up to $60,000 Γ1.00, $90,000 Γ1.08, $130,000 Γ1.18, $180,000 Γ1.30, $250,000 Γ1.45, above Γ1.62
- Income tax runs once per applicant on their share of taxable income. 2026-27: nil to $18,200, 15% to $45,000, 30% to $135,000, 37% to $190,000, 45% above. The lowest rate is 16% in 2025-26 and 14% from 2027-28.
- LITO is $700, less 5c a dollar above $37,500 and 1.5c above $45,000, gone by $66,667.
- Medicare levy is 2% of combined taxable income: nil up to $27,222 single or $45,907 for a family (plus $4,216 a dependant), phased in at 10c a dollar to 1.25 times that.
- Medicare levy surcharge, without hospital cover: 1%, 1.25% or 1.5% above $101,000, $118,000 or $158,000 single; $202,000, $236,000 or $316,000 for a family, plus $1,500 for each child after the first.
- HELP repays 15% of income above the threshold up to $125,000, and 17% above.
| Field | What it is | In the maths | Raise it |
|---|---|---|---|
| City | Living costs without housing, from the Cost of Living Comparator. | c: Sydney 102.0, Melbourne 98.8, Brisbane 102.7, Perth 100, Adelaide 109.2, Canberra 106.1, Hobart 86.5, Gold Coast 84.3, Regional 95.0. | dearer city: βΌ capacity |
| Adults in the household | One or two applicants. | Two: b = $2,750, two taxpayers, the family Medicare and surcharge thresholds. | two: lower tax, higher HEM |
| Second applicant's share of income | How taxable income splits between two applicants, 0% to 50% (50%). | The scale and LITO run on each share. Medicare, the surcharge and HELP stay on the combined figure. | toward 50%: β² capacity |
| Dependants | Children or others relying on your income, 0 to 6. | +$480 a month each in HEM before city and band; lifts the Medicare and surcharge family thresholds. | βΌ capacity |
| Declared living expenses | Your own monthly figure, without rent, debt repayments or property outgoings. | E = max(declared, HEM). The note under it says which is used. | βΌ capacity, once above HEM |
| Private hospital cover | On by default. | Off: surcharge = tier rate Γ taxable income, the tier tested on income plus any rental loss. | on: no surcharge |
| Resident tax year | 2025-26, 2026-27 or 2027-28. | The lowest bracket rate: 16%, 15% or 14%. | later year: β² capacity |
| Study loan (HELP or HECS) | Deduct as tax, Treat as a commitment, or No study loan. | The same repayment in T or in K, so capacity is the same either way; only the NSR differs. | a loan: βΌ capacity |
| Repayment threshold | The income where HELP repayments start ($67,000). | 15% of income above it to $125,000, 17% above, on taxable income plus any rental loss. | β² capacity |
Declaring less than HEM gains nothing. The couple declare $4,800 a month, but HEM for two adults and two children in Melbourne on $185,000 is $5,315, so $5,315 is used. Cutting the declared figure changes nothing; only a figure above HEM moves the answer.
- Two taxpayers, not one. Pooling $185,000 in one name pushes it into the 37% bracket. Split 50/50 the couple pay $40,240 a year; all in one name, $53,220.
- A raise can lower capacity. HEM steps up at each band edge. For the couple, $181,000 of income supports $57,469 less than $180,000, because HEM jumps from $4,765 to $5,315 a month. The dips in the chart's serviceability line are these steps.
Debts: commitments and existing debt
Every dollar a month already promised elsewhere is a dollar the new loan cannot use. A lender also stress tests your other debts the way it tests the new one, and counts a card at the repayment its whole limit could demand.
- Kexisting commitments a month, in R
- Dexisting debt, in LDTI
- ran other loan's actual rate
| Field | What it is | In the maths | Raise it |
|---|---|---|---|
| Detail | Simple hides a lender's settings; they stay live at their defaults. | Nothing changes until a value does. | shows more fields |
| Tick what you have | Six boxes: another home loan, a card, a personal loan, BNPL, support paid, a facility closing. | Unticked, that group's fields are nil. | opens the group |
| Total balance | What is owed on other home and investment loans. | Re-amortised in K; in D. | βΌ capacity |
| Actual rate | The rate paid on it today (6.20%). | Tested at max(rate + buffer, floor): 9.20% at the defaults. | βΌ capacity |
| Remaining term | Years left on it (25, Detailed). | The months its repayment is spread over. | β² capacity |
| Repayment type | Principal and interest, or interest only (Detailed). | Interest only is tested as principal and interest over the years left after it ends. | interest only: βΌ capacity |
| Interest only period left | Years of interest only to run (3). | Shortens its window to term β this. | βΌ capacity |
| Credit card and line of credit limits | The total limit, not the balance. | Limit Γ the assessed rate in K; the limit in D. | βΌ capacity |
| Assessed monthly rate | The share of the limit counted a month, 3.0% to 3.8% (3.80%, Detailed). | $10,000 of limit at 3.8% is $380 a month. | βΌ capacity |
| Monthly repayments (personal and car loans) | What you pay a month. | In K as entered. | βΌ capacity |
| Balances outstanding | What is still owed on them. | In D only. | βΌ DTI cap |
| Monthly instalments (BNPL) | Buy now pay later instalments a month. | In K as entered. | βΌ capacity |
| Total limits (BNPL) | Your BNPL limits. | In D only. | βΌ DTI cap |
| Occupancy | Owner occupier, or investor still renting or boarding. | Owner: rent after settlement is nil. Investor: it counts in K. | investor: rent counts |
| Rent or board paid after settlement | An investor's own rent, a month. | In K. | βΌ capacity |
| Strata, rates and insurance on the new property | Running costs of the home you are buying ($350 a month). | In K. | βΌ capacity |
| Child support or maintenance paid | What you pay a month. | In K. | βΌ capacity |
| Investment property outgoings not netted off rent | Only what the rent shading misses (Detailed). | In K. Leave it at nil if rent is shaded 70% to 80%. | βΌ capacity |
| Repayments being refinanced or closed | Facilities paid out at settlement. | Taken off K. | β² capacity |
| Balances being refinanced or closed | Their balances. | Taken off D. | β² DTI cap |
An unused card still costs you. The couple's $15,000 limit counts as $570 a month whether they owe on it or not, about $71,000 of capacity at the 8.90% test. Cutting a limit before applying is the cheapest lift there is.
Loan: the rate you are tested at
You may pay 5.90%, but APRA requires lenders to test that you could pay at least 3 points more, and many set a floor too. The test rate, not the rate you pay, turns the surplus into a loan.
- Pthe assessed repayment on the capacity, LMI included
- nmonths the new loan is tested over
| Field | What it is | In the maths | Raise it |
|---|---|---|---|
| Detail | Simple states the policy in a note; Detailed shows the four dials. | The dials stay live at their defaults either way. | shows more fields |
| Product rate offered | The rate you would pay (5.90%). | In ra with the buffer. | βΌ capacity |
| Loan term | Years to repay (30). | n: more months, a smaller repayment per dollar. | β² capacity |
| Interest only to start | Interest only at the start of the loan. | Tested as principal and interest over the years left after it. | on: βΌ capacity |
| Interest only period | Years of it (5). | Comes off n. | βΌ capacity |
| APRA buffer | Points added to the product rate, 0% to 5% (3.00%, since October 2021). | In ra; also on other home loans. | βΌ capacity |
| Lender floor | The lowest rate the lender tests at (5.50%). | Used only when above rate + buffer. | βΌ capacity, once it binds |
| Minimum left each month (UMI) | The surplus the lender insists on after everything ($250). | U comes off R. | βΌ capacity |
| Minimum income cover (NSR) | The NSR the lender wants, 1.00 to 1.20 (1.00). | A pass or fail test at the capacity. It does not change the loan. | may fail; same capacity |
The NSR minimum only flags. Set it to 1.10 for the couple and the tool reports a fail (their NSR is 1.02), but capacity stays $686,999. A lender with that rule would lend less; this tool sizes the loan on UMI alone.
- Rate and buffer are one number to the test. One point on either moves the answer by the same amount, because only their sum counts. The floor matters only when it is higher, which at 5.50% it is not.
- What you would really pay. The couple's capacity costs $5,478 a month at 8.90%, the test, and $4,075 at the 5.90% they would pay. The gap is the buffer for rate rises.
Purchase: the three hard caps
Serviceability asks what you can repay. These three ask what is prudent to lend at all, whatever your income: a multiple of income, a share of the property, and what your deposit reaches.
- Dexisting debt (Debts)
- Sthe deposit left after purchase costs
- income: gross unshaded, or assessable (shaded)
| Field | What it is | In the maths | Raise it |
|---|---|---|---|
| Detail | Simple asks no LVR or valuation: 80%, or 95% with LMI, and the price. | Detailed opens on the figures Simple was using. | shows more fields |
| Purchase price | What you would pay. | In LLVR; percentage duty and a percentage deposit scale with it. | β² LVR cap, β² duty |
| Bank valuation | The lender's value (Detailed). | The LVR cap uses the lower of price and valuation. | β² LVR cap, up to the price |
| Deposit funds | Enter an amount (cash, costs paid from it) or Percentage of price (the down payment, costs on top). | S, so Ldep; and the max purchase price. | β² deposit cap |
| Stamp duty | Percentage of price (4.00%) or Enter an amount. Not worked out by state. | Comes off savings in S. | βΌ deposit cap |
| Other purchase costs | Conveyancing, transfer, building and pest ($4,000). | Comes off savings in S. | βΌ deposit cap |
| Lenders Mortgage Insurance | Lets the lender go past 80% LVR, to 95%. | Simple: max LVR 95%. The premium is added to the loan, so Lserv Γ· (1 + m). | on: β² LVR and deposit caps, βΌ serviceability |
| LMI premium | As a share of the loan (2.50%). | m, serviced on top of the loan. | βΌ capacity |
| Maximum LVR | The largest loan as a share of the value, 50% to 95% (80%, Detailed). | In LLVR and Ldep. | β² LVR and deposit caps |
| DTI cap | Total debt as a multiple of income, 3 to 9 (6.00Γ, Detailed). | In LDTI. | β² DTI cap |
| Income basis | Gross income, unshaded, or Assessable income, shaded. | The income in LDTI. Shaded is stricter. | shaded: βΌ DTI cap |
Capacity is the loan on this home. The LVR cap is a share of the price you enter, so a cheaper home can lower the answer. For the couple, a $828,000 home caps the loan at $662,400, below what their income services.
- A deposit is leverage. At 80% LVR each dollar of deposit supports four of loan; at 95%, nineteen. That is why LMI turns the first home buyer's $66,000 from the binding cap into one with room to spare.
- LMI cuts both ways. It lifts the LVR and deposit caps, but the premium is borrowed too, so the serviceability cap is divided by 1.025. On a thin margin it can leave a borrower worse off.
Worked example: Couple, Melbourne
The Quick Start as it loads, worked by hand in the order of the Serviceability build-up. Two applicants, two children, $185,000 between them split 50/50, buying a $920,000 house with $300,000 saved.
From gross income to the loan
2026-27 scale, private hospital cover, no study loan. Each line is a line of the tool's table.
- Gross assessable income$185,000 a year, Simple, counted in full$15,417/mo
- Income tax after LITOeach of two: 15% Γ ($45,000 β $18,200) + 30% Γ ($92,500 β $45,000) = $18,270; LITO nil above $66,667; Γ 2 = $36,540β$3,045/mo
- Medicare levy2% Γ $185,000 = $3,700β$308/mo
- Net income available($185,000 β $40,240 total tax) Γ· 12$12,063/mo
- Living expensesHEM: ($2,750 + 2 Γ $480) Γ 98.8 Γ· 100 Γ 1.45 = $5,315, above the $4,800 declaredβ$5,315/mo
- Existing commitments3.8% Γ $15,000 card limit = $570, plus $450 strata, rates and insuranceβ$1,020/mo
- Minimum surplus buffer (UMI)the lender's $250β$250/mo
- Maximum new repayment$12,063 β $5,315 β $1,020 β $250$5,478/mo
- Assessment ratemax(5.90% + 3.00%, 5.50%); i = 0.7417% a month, n = 3608.90%
- Loan this supports$5,478.39 Γ (1 β 1.007417β360) Γ· 0.007417 = $5,478.39 Γ 125.40$686,999
- Debt to income6 Γ $185,000 β $15,000 card limit$1,095,000
- Loan to value80% Γ $920,000$736,000
- Deposit$300,000 β $50,232 duty (5.46%) β $4,000 = $245,768; Γ 0.8 Γ· 0.2$983,072
- Borrowing capacitythe smallest: serviceability, $49,001 under loan to value. With the $245,768 deposit it buys up to $932,767.$686,999
- The tool shows the same. Borrowing capacity $686,999, assessed at 8.90% over 30 years; Binding constraint serviceability, next limit $736,000; Income cover (NSR) 1.02 ($12,063 Γ· $11,813); Left each month (UMI) $250.
- UMI is the test that sizes the loan. At the capacity exactly $250 a month is left, by construction, so the NSR is just above 1.
What moves it most
Each bar lowers or raises one input by a step worth arguing about, and keeps the rest of the Couple, Melbourne example where it was.
- Dependants2 β 1 / 3+$49kβ$86k
- Gross income$185,000 β $166,500 / $203,500β$67k+$49k
- Declared living expenses$4,800 β $3,800 / $5,800 a month$0β$61k
- Product rate offered5.90% β 4.90% / 6.90%+$49kβ$57k
- APRA buffer3.00% β 2.00% / 4.00%+$49kβ$57k
- Credit card limit$15,000 β $5,000 / $25,000+$48kβ$48k
- Minimum left each month (UMI)$250 β $0 / $500 a month+$31kβ$31k
- Loan term30 β 25 / 35 yearsβ$29k+$19k
- Purchase price$920,000 β $828,000 / $1,012,000β$25k$0
- Deposit funds$300,000 β $250,000 / $350,000$0$0
Read it from the top: the longest bar is the input the answer rests on most. Measured by _sensitivity.mjs, beside this page.
- The downside is all serviceability. A third child, $1,000 a month more declared spending or a 1 point higher rate each take $57,000 to $86,000 off. Those are the risks to price in before you bid.
- The upside hits a wall. Without the LVR cap, 10% more income would add $131,000 and a 1 point lower rate $67,000. On a $920,000 home neither can push the loan past $736,000; to borrow more the couple would need a dearer home, or LMI.
- The cheap levers. Expenses below HEM and a bigger deposit do nothing here. Cutting the card limit is the one change in their own hands that lifts the answer.
One more dependant
HEM rises $688 a month and capacity falls to $600,767. The serviceability line drops across the chart.
One fewer
HEM falls below the $4,800 declared, so the declared figure is used. Capacity rises to $736,000 and Binding constraint turns to loan to value.
Back to two
Serviceability binds again at $686,999.
What it leaves out
A model of the common approach, not any one bank's credit policy. Shading, HEM tables, floors, card rates and caps all differ between lenders.
- HEM is a stand-in. The real benchmark is a licensed table from the Melbourne Institute. Here it is $1,850 or $2,750 plus $480 a dependant at Perth prices, six income bands and a city index.
- Tax is the resident scale only. LITO and the Medicare levy, with no other deductions, offsets or salary sacrifice. The levy, the surcharge and HELP run on combined income, and negative gearing uses the higher earner's rate.
- Purchase costs are yours to enter. Stamp duty is not worked out by state, and first home grants and concessions are not applied.
- LMI is a flat percentage. Real premiums climb steeply with LVR and loan size. The LVR and deposit caps apply to the loan before the premium is added.
- The NSR minimum never resizes the loan. It is a pass or fail check; UMI alone sizes serviceability.
- The new home's own rent is not counted. An investor's purchase earns nothing unless you add the rent under Investments.
- Rates stand still. One rate for the whole term: no fixed period ending, no offset account, no rate change.
- A lender weighs more. Credit history, how long you have held the job, genuine savings, the property type and postcode, and your age against the term.
When not to lean on it. Complex self-employment, trusts or overseas income; a lender you know is stricter; or a next cap within a few per cent of the binding one, where a small change flips which cap decides. Then ask a broker or the lender.
Ready to try your own figures?
Open the tool