Borrowing Capacity Calculator
Before you fall in love with a listing, it helps to know roughly how much a lender will actually lend you. In Australia that figure is not "income × some multiple" — it is driven by your net income surplus: what is left of your monthly pay after tax, the Medicare levy, any HECS/HELP repayment, credit-card and other-debt obligations, and your living expenses. Whatever surplus remains is what a bank treats as available to service a mortgage.
Two rules from the prudential regulator (APRA) shape the result. First, lenders must assess you at your contract rate plus a serviceability buffer of about 3 percentage points — so a 6.20% loan is stress-tested at roughly 9.20%, ensuring you could still cope if rates rose. Second, banks watch your debt-to-income (DTI) ratio, with total debt around 6× gross annual income treated as a soft ceiling that narrows your choice of lenders. The calculator above applies both and reports three figures — Conservative, Base and Maximum — that differ only in how your living expenses are estimated.
For a single first-home buyer earning $95,000 a year with a $10,000 total card limit and no other debts, the tool's Base estimate is about $356,000, rising to roughly $403,000 in the Maximum case. One caveat applies to everything here: the 6.20% lender rate is an illustrative assumption, the HEM living-cost benchmark is an indicative approximation rather than the licensed figure a lender uses, and the output is an estimate — not a loan offer or financial advice. Use it to frame the conversation with a licensed mortgage broker.
How the calculator estimates your capacity
Step 1 — Stress-test rate (APRA buffer)
Lenders do not assess you at the rate you will actually pay. They add a serviceability buffer of 3 percentage points to your contract rate:
Assessment rate = contract rate + 3.00%
At the illustrative 6.20% contract rate that is 9.20%. Every repayment in the capacity calculation uses this higher rate, which is why a small change in the assumed rate moves your borrowing power noticeably.
Step 2 — Net Income Surplus (NIS)
NIS is the monthly cash a lender believes you can put toward a mortgage:
NIS = (Gross ÷ 12) − Income Tax − Medicare Levy − HECS/HELP − Card Obligation − Car Loan − Other Debt − Living Expenses
| Component | How it is modelled |
|---|---|
| Income tax + Medicare | 2025-26 resident marginal scale + 2% Medicare levy |
| HECS/HELP | Marginal compulsory repayment if you flag a study debt |
| Card obligation | 3% of your total card limit per month — limit, not balance |
| Car / other debt | Your declared monthly repayments |
| Living expenses | The higher of what you declare and the HEM benchmark |
Step 3 — Maximum loan from surplus (reverse amortisation)
The surplus is converted into a loan size by reverse-amortising a 30-year (360-month) loan at the assessment rate:
P = M × [(1 + r)³⁶⁰ − 1] ÷ [r × (1 + r)³⁶⁰], where r = assessment rate ÷ 12 and M = monthly NIS.
Step 4 — Debt-to-income (DTI) cap
Finally the result is capped at an illustrative 6× gross annual income:
Max loan = MIN(surplus-based capacity, 6 × gross income)
For the $95,000 buyer that DTI ceiling is $570,000; the surplus-based figure is well below it, so serviceability — not DTI — is the binding constraint here.
The three scenarios
- Conservative — uses the HEM benchmark as your living-cost floor (most cautious).
- Base — uses the higher of your declared expenses and HEM (a typical major-bank approach).
- Maximum — leans on your lower declared expenses (best case; only realistic if your budget is genuinely lean).
What the model leaves out
It assumes a 30-year principal-and-interest term, a constant rate, and indicative (not licensed) HEM figures. It does not model rental income, guarantor structures, or any one lender's specific policy. Treat it as a planning estimate, then verify with a broker.
Worked example: single first-home buyer on $95,000
Illustrative assumptions: gross income $95,000/year, total credit-card limit $10,000, no car or other loans, declared living expenses $2,200/month, lender rate 6.20% p.a. (stress-tested at 9.20%), 30-year term. The indicative HEM benchmark for this income is $31,000/year (about $2,583/month), which sits above the declared figure — so the Conservative and Base scenarios both fall back to the HEM floor.
| Scenario | Monthly surplus (NIS) | Max borrowing capacity | DTI |
|---|---|---|---|
| Conservative | $2,918 | $356,000 | 3.75× |
| Base | $2,918 | $356,000 | 3.75× |
| Maximum | $3,301 | $403,000 | 4.24× |
The Base estimate of $356,000 is the number most major banks would land near. The Maximum case ($403,000) only applies if your real spending is genuinely below the HEM benchmark — lenders will scrutinise lean budgets.
Two levers that move the number most
- Credit-card limits. Lenders count 3% of your total limit as a monthly obligation regardless of balance. Dropping this buyer's $10,000 card limit to zero lifts the Base estimate from $356,000 to $392,000 — about $36,000 of extra capacity for closing an unused card.
- The assessment rate. Because you are tested at the buffered rate, a 1-point rise in the lender rate (from 6.20% to 7.20%, assessed at 10.20%) trims the Base capacity by roughly $30,000, from $356,000 to $326,000.
To turn a borrowing figure into a deposit-and-costs plan, pair this with FiMo's closing-costs and savings-roadmap tools.
Frequently asked questions
How much can I borrow on a $95,000 salary?
It depends on your debts, expenses and the assessment rate, not just income. For a single buyer on $95,000 with a $10,000 card limit and no other loans, this calculator's Base estimate is about $356,000, with a Conservative figure of $356,000 and a Maximum of $403,000 — all at an illustrative 6.20% rate stress-tested at 9.20%. Re-run the tool with your real income, debts and your lender's actual rate.
What is the APRA serviceability buffer and why does it cut my capacity?
APRA requires lenders to assess your repayments at your contract rate plus a buffer of about 3 percentage points, so you are tested on whether you could still pay if rates rose. At an illustrative 6.20% contract rate you are assessed at 9.20%. Because the higher rate inflates the assumed repayment, it shrinks the loan your surplus can support — it is the single biggest reason your "capacity" is lower than a simple income multiple would suggest.
How does a credit card limit affect my borrowing capacity?
Lenders count 3% of your total card limit as a monthly obligation — and they use the limit, not your balance, so an unused card with a high limit still hurts. In the worked example, cutting a $10,000 card limit to zero lifts the Base estimate from $356,000 to $392,000 — roughly $36,000 more capacity. Reducing or closing cards before you apply is one of the fastest ways to borrow more.
What is a debt-to-income (DTI) ratio and what is the limit?
DTI is your total debt divided by gross annual income. Lenders treat roughly 6× income as a soft ceiling: above it, fewer lenders will approve you. For the $95,000 buyer, 6× income is $570,000, but the surplus-based capacity ($356,000 at Base) sits well under that — so here serviceability, not DTI, is the binding constraint. DTI tends to bite on higher incomes or when you already carry other debt.
Why are the Conservative, Base and Maximum numbers different?
They differ only in how living expenses are estimated. Conservative uses the HEM benchmark as a floor; Base uses the higher of your declared expenses and HEM (what most major banks do); Maximum leans on your lower declared expenses. In the example, Conservative and Base both land at $356,000 because the HEM floor ($31,000/year) exceeds the declared budget, while Maximum reaches $403,000. Treat Base as the realistic planning figure.
Is the HEM benchmark used here a real lender figure?
No. The HEM (Household Expenditure Measure) figures in this tool are indicative approximations, not the licensed Melbourne Institute values a real lender applies. We use bands (for example about $31,000/year at a $95,000 income) so you can see how the floor works, but a lender's actual HEM depends on income, household size and postcode. Declare your true expenses and confirm with a broker.
Does a HECS/HELP debt reduce how much I can borrow?
Yes. Your compulsory HECS/HELP repayment is a deduction from your monthly surplus, so flagging a study debt lowers your net income surplus and therefore your capacity. The size of the hit rises with income under the 2025-26 marginal repayment scale. It is not a reason to rush a voluntary repayment, but it is worth modelling — toggle the HECS option in the calculator to see the difference for your income.