Free tool · Australia
Borrowing Power Calculator
Joint applicants, income-type haircuts, tiered HEM, credit-card 3% rule, HECS schedule, APRA's 3% serviceability buffer — the key levers in lender serviceability models.
Joint applicants, income-type haircuts, tiered HEM, credit-card 3% rule, HECS schedule, APRA's 3% serviceability buffer — the key levers in lender serviceability models.
Each row applies the next deduction. The biggest negative deltas are the biggest hits to your capacity.
| Deduction layer | Max loan | Δ from previous |
|---|
Indicative only. Lenders apply different HEM tables, credit-scoring rules, and negative-gearing allowances. Foreign-currency income, bonuses, second jobs, and rental from existing portfolios all get treated differently. Get a formal pre-approval for your specific lender's number.
Last reviewed 12 July 2026 · rates and thresholds verified against official FY2026-27 sources.
Every major Australian lender follows the same four-step model — with their own tweaks at each step:
This calculator replicates all four steps with the same conventions a big-four lender uses, producing a figure typically within ±5-15% of a formal pre-approval. For an exact number specific to your situation, get pre-approved with your chosen lender or broker.
Before October 2021, APRA required a 2.5% buffer above your loan rate. They lifted it to 3.0% during the post-COVID housing boom and have left it there since. On a $1m loan at 6.25%, that 0.5% difference shifts how lenders test you from 8.75% to 9.25% — reducing your borrowing capacity by approximately 6%.
The buffer ensures you can still afford repayments if rates rise — which, with the cash rate ranging from 0.1% in late 2021 to 4.35% in late 2023 and back to high-3% in 2026, is a real-world consideration.
HEM is a quarterly benchmark of "reasonable" minimum living expenses produced by the Melbourne Institute. The real HEM has 36+ buckets segmented by household size, income band, and "modest" vs "low-cost" basket. The full table is paywalled commercial data; lenders subscribe via HEM Pro.
This calculator uses a simplified seven-tier income-band approach that converges within ~$200/month of the actual lender figure across the band. If your real expenses are well above HEM, your real expenses are used — HEM is a floor, not a ceiling.
A $20,000 credit card limit you never touch will still reduce your borrowing power by approximately $60,000-$80,000. This is because APRA requires lenders to assess credit cards at 3.0% per month of the full limit, treating the limit as a potential cash-flow drain in case you draw down. The actual balance, your repayment history, and the interest rate on the card are all irrelevant.
Practical advice: at least 30 days before applying for a home loan, reduce or close any cards you don't actively need. Many borrowers reclaim $80-150k of borrowing power this way for free.
HECS reduces borrowing power not via the debt balance but via the mandatory repayment on your income — and since 1 July 2025 that repayment is marginal, like income tax, rather than a percentage of your whole income. For FY 2026-27: nil up to $69,528, then 15c per $1 between $69,529 and $129,717, then $9,028 plus 17c per $1 up to $186,050 — and above $186,050 a flat 10% of your entire repayment income applies (a cliff, not a marginal step). On a $110,000 income, HECS costs you approximately $6,071 per year in mandatory repayments — equivalent to roughly $60,000 less borrowing power.
If you're close to paying off your HECS, settling it before applying can be a fast borrowing-power win. If you have many years left on a moderate balance, the borrowing-power cost remains constant year to year (it's tied to income, not balance).
Lenders combine joint applicant incomes but apply each applicant's haircut individually. A couple with one PAYG ($100k) and one casual ($60k) is assessed at $100,000 + ($60,000 × 80%) = $148,000 effective gross. HECS is applied per applicant if they have one. Living expenses are household-level (two adults' worth of HEM, not one).
If one applicant has a substantial existing debt or low credit score, some lenders will offer the loan to the stronger applicant alone — but at lower total borrowing capacity since only one income counts. Worth a conversation with a broker if your situation is unusual.
For complex situations, a mortgage broker who works with 20-30 lenders will get you a more precise number than this calculator (or any single lender's calculator).