Borrowing Power Calculator
Estimate how much you can borrow for a home loan in a few simple steps.
Who is the loan for?
What is the property for?
Number of dependents?
Your income before tax
e.g. bonus, overtime, dividends
Please enter expenses below. To have your expenses estimated automatically, please switch on.
My bills and living expenses (monthly)
(e.g. car loan, personal loan)
Based on your details, you can compare the following home loans
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Whether you’re a first home buyer or a savvy investor, RateCity’s borrowing power calculator is an essential tool to work out your price bracket. Every house hunter in Australia will want an answer to the question “how much can I borrow” early in their search for real estate.
Once you’ve worked out how much you can realistically borrow (and comfortably afford to repay), then you can really start narrowing down your search for the perfect home or investment property, and the perfect home loan to match.
RateCity’s borrowing power calculator will help you get the home buying process rolling by providing a straightforward estimate of how much a financial institution could lend you, based on the personal information you provide.
How we’ve made our estimate
We’ve designed this calculator to give you an idea of how much lenders are likely to let you borrow. The calculator aims to simplify the banks’ notoriously complex serviceability criteria to help you work out what you should be aiming for when thinking about a new home loan.
Each lender works out how much they’ll lend to you in a slightly different way. We’ve spoken to lenders and brokers, read industry papers, studied calculators made by lenders and loan documentation to identify the common ways lenders determine your borrowing profile.
This calculator estimates the largest loan amount you could afford to repay each month, after you pay for your living expenses and other debts. Importantly, the calculator is not reckless – it also adds a realistic buffer into the calculations to account for changes to your circumstances in the long term.
Remember that RateCity’s borrowing power calculator provides a guideline only. Each lender assesses home loan applications using their own methodology, so there is never a one-size-fits-all answer to the question of how much you can borrow when you buy a home or refinance a mortgage.
Any advice provided by our calculator is general in nature and has not taken into account your personal circumstances (see our full disclaimer). It’s important to talk to your preferred lender to check whether you meet their specific serviceability criteria.
Borrowing on your own or jointly with another person can make a big difference to your borrowing power. On one hand, if there’s a second person and a second income, you may be able to borrow more, but on the other hand, if there’s two borrowers, the lender will assume your expenses are higher.
We also ask you how many dependent kids you’ve got, not because we’re trying to conduct a quasi-census, but because kids cost money. The more dependants you have, the less you may be able to borrow.
Entering your monthly or annual income for you and your partner provides the baseline for calculating your borrowing power. The more income you earn, the easier it may be for you to afford the higher home loan payments on a bigger mortgage.
Additional income, such as bonuses, overtime, dividends, rental income investments or side gigs can also affect your borrowing power. However, many mortgage lenders may only partially include this income in their calculations (e.g. 80 per cent) as this income may not be as reliable or consistent as your regular wage or salary.
To help you save time and effort, our borrowing power calculator includes an option to estimate your expenses. These estimates are based on statistical averages from the Australian Tax Office (ATO), based on the number of adults and dependent children in your household.
However, you can also choose to provide your own expenses, so the calculator can provide a more accurate estimate.
Don’t bother trying to pull the wool over the lender’s eyes – they’re not going to believe that you’re paying $200 in monthly expenses when you’re supporting three kids. It’s also really important not to fool yourself. Honesty is the best policy, as you’re going to have to come up with the mortgage repayments month after month for the next 20 or 30 years. “Adjusting” your expenses so you can borrow more than you can really afford could see you risk ending up in mortgage stress.
Living expenses can be tough to estimate. Some people can recite their monthly, fortnightly or weekly expenses down to the cent but if you’re a little more carefree about your money, it may take some time to work out exactly where your money goes. Sit down with your monthly bills and account statements to work out your expenses.
The industry standard is to base minimum monthly expenses on whether you’re a single borrower, or a couple, and the number of dependents. This is in line with the Melbourne Institute’s quarterly report.
The current minimums are:
|Number of dependents (kids I support)||Single (It's just me||Joint (There's two of us)|
When most lenders assess your home loan application, they’ll calculate if you could afford the mortgage payments assuming a “worst case scenario” where you’ve maxed out your credit cards. Even if you always pay off your card on time, they’ll assume that credit card interest charges are a regular part of your household budget, pushing up your monthly expenses.
If you want to borrow more in your home loan, consider taking the scissors to your collection of credit cards. If you cancel one or more credit cards, or drop your total credit card limits, these forecast expenses can drop, allowing you to borrow more money in your mortgage.
Other loan payments
Much like with credit cards, if you can afford to reduce your outstanding debts or pay off other financial commitments, such as personal loans or car loans, this may help reduce your forecast monthly expenses and make it easier to be approved for a larger home loan.
If you already have a home loan, and you’re looking to take out another one, most lenders will factor in a buffer on top of your current home loan repayment, in case of higher variable rates in future. We’ve included this buffer in our calc
How we find your mortgage borrowing amount
To work out how much a lender may choose to lend you, our Borrowing Power Calculator takes the following steps:
- Add up your total assessable income.
- Work out your total expenses, including loans and credit cards.
- Set aside 15 per cent of your income as a buffer to cover any unforeseen. circumstances
- Work out how much money is left over in your budget to go towards your monthly mortgage repayment.
- Calculate your home loan repayments for a 30-year loan and an interest rate of 5.5 per cent. Rates are at historical lows, but lenders play it safe and assume they won’t always be. The floor rates used vary between lenders, though 5 or 6 per cent is a common benchmark.
- Determine the maximum borrowing capacity (loan size) based on your assessable income left over after your total expenses, including loans, credit cards and 15 per cent buffer are factored in.
Remember that this is just an estimate, and that each lender will look at your finances slightly differently. Your maximum borrowing amount may vary depending on which bank or mortgage lender you speak to.
Other important notes
- All calculations are estimates; they are not guarantees you’ll be able to borrow a particular amount, and are not pre-qualifications for borrowing.
Lender serviceability assumptions can change at any time; this will affect how much you can borrow.
Interest rates can change at any time. The calculator assumes a floor rate of 5.5 per cent, but you may want to consider a higher percentage if you believe rates may rise even higher in future.
This calculator measures loan serviceability, which is only one factor used by lenders when deciding whether to approve a loan. Your credit history, financial situation, employment details and what property you are buying may also play a role.
This calculator is for information purposes only. Any advice is general and has not taken into account your personal circumstances, read more here.
How your home loan deposit can affect your borrowing power
Once you have an idea of how much you may be able to borrow for a home loan, it’s important to also think about how much you can afford to pay as a deposit. Generally the more money you can save up as a deposit, the easier it may be to secure a larger home loan.
Many lenders will prefer that you pay a minimum home loan deposit of at least 20 per cent of the property value upfront. This is sometimes described as having a loan to value ratio (LVR) of 80 per cent. For example, if you’re planning to buy a property valued at $500,000, you may need a deposit of $100,000 in order to borrow $400,000.
Having a smaller deposit doesn’t mean you can’t get a home loan, though it may be harder to get the lowest interest rates. You may be able to apply for a home loan with a deposit of 10 per cent or even 5 per cent of the property’s value. However, having a deposit lower than 20 per cent means you’ll likely need to pay for a Lenders Mortgage Insurance (LMI) policy. This covers your lender (and not you) against the risk that you’ll default on your repayments.
Most banks and mortgage lenders pass the cost of LMI on to borrowers – the lower your deposit, the more your LMI may cost. This could add tens of thousands of dollars to your loan’s upfront costs. It’s sometimes possible to add these extra costs onto your mortgage to pay off over your loan term, though the extra interest repayments over time may ultimately cost you more money.
It’s often important to show that most of your home loan deposit is made up of savings from money earned at your job. This savings history can demonstrate your financial responsibility to potential lenders, which may help improve your chances of seeing your mortgage application approved.
Personal Finance Writer
Alex is a personal finance writer and PR professional at RateCity, and has been writing about finance for over three years. She is passionate about closing the gender pay and superannuation gap, and aims to help young Aussies to overcome their financial apathy and better manage their finances. Alex has been published in numerous print and online outlets, including Money Magazine, Lifehacker Australia, and Business Insider.