Borrowing Power Calculator

Category: Mortgage and Real Estate
- April 02, 2025
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Calculate your home loan borrowing power based on your income, expenses, and current financial situation. This calculator provides an estimate of how much you might be able to borrow for a mortgage.

Income Details

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$

Loan Details

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years
%
Lenders typically assess your borrowing capacity at a higher rate to ensure you can handle future rate increases.

Existing Financial Commitments

$

Existing Debts

1
$
$

Additional Options

%
Maximum percentage of gross income that should go toward mortgage repayments.
%
Maximum loan amount as a percentage of the property value (lower ratio may avoid Lenders Mortgage Insurance).

About Borrowing Power

Borrowing power refers to the maximum amount a lender may be willing to lend you based on your financial situation. Understanding your borrowing power helps set realistic expectations for your property search and ensures you don't overextend yourself financially.

Factors That Affect Your Borrowing Power
  • Income: Your total household income, including salary, investments, and other sources.
  • Expenses: Your regular living expenses, which lenders estimate based on household size.
  • Existing Debts: Credit cards, personal loans, car loans, and other financial commitments.
  • Interest Rates: Current rates plus a buffer to ensure you can handle future rate increases.
  • Loan Term: The length of your mortgage affects your monthly payments.
  • Credit Score: A higher credit score may increase your borrowing power.
  • Employment Stability: Steady employment history improves your borrowing potential.
How Lenders Assess Borrowing Power
  1. Income Assessment: Lenders verify your income through pay slips, tax returns, or bank statements.
  2. Expense Calculation: Your living expenses are assessed based on declared expenses or standard benchmarks.
  3. Debt Serviceability: Lenders check if you can comfortably meet repayments at a higher "assessment rate."
  4. Debt-to-Income Ratio: Lenders examine your total debt obligations relative to your income.
  5. Loan-to-Value Ratio (LVR): The loan amount compared to the property value, affecting whether you need LMI.
Important Notes
  • This calculator provides an estimate only. Actual loan approvals depend on lender-specific criteria.
  • Different lenders have different policies and may offer varying loan amounts.
  • Consider seeking pre-approval from a lender to get a more accurate assessment.
  • Just because you can borrow a certain amount doesn't mean you should. Consider your comfort level with repayments.
  • Remember to account for additional costs like stamp duty, legal fees, and moving expenses.
Borrowing Power Formula:
Borrowing Power = (Annual Income × DSR%) ÷ (Assessment Rate + Other Debt Obligations)

What Is the Borrowing Power Calculator?

The Borrowing Power Calculator is a helpful tool for estimating how much you may be able to borrow for a home loan based on your income, expenses, debts, and other financial details. It acts as a home loan estimator that gives you a clearer picture of your loan affordability before speaking with a lender.

Whether you're buying your first home or planning your next property move, this mortgage affordability tool simplifies the early stages of budgeting and helps guide your property financing decisions.

Why Use This Calculator?

This calculator helps you:

  • Understand your borrowing capacity before applying for a home loan
  • Plan your home purchase with realistic expectations
  • Estimate monthly mortgage costs using a built-in mortgage payment guide
  • Visualize your monthly loan breakdown including debts and living expenses
  • Explore how changes in interest rates or income affect your loan eligibility

How to Use the Calculator

Follow these simple steps to get an estimate of your borrowing power:

  • Enter your income: Include your primary salary and any additional income such as rental or bonus payments.
  • Select application type: Choose whether you're applying alone or with a co-applicant, and enter both incomes if applicable.
  • Add loan details: Input your desired interest rate, loan term, and lender buffer rate.
  • List your expenses: Include monthly living costs, number of dependents, and any existing debts such as credit cards or personal loans.
  • Adjust advanced options: Set your preferred loan-to-value ratio and maximum debt service ratio.
  • Click "Calculate Borrowing Power": The tool will display your estimated borrowing amount, monthly repayment, and an estimated property price range.

How This Calculator Helps You

This tool acts as your personal house financing planner, helping you make informed choices by:

  • Breaking down your income, expenses, and debts into a visual chart
  • Estimating a realistic property price based on your financial situation
  • Providing detailed results so you understand how the estimate was calculated
  • Serving as a monthly mortgage planner to compare different loan terms or rates

It works alongside other tools like a loan amortization calculator or mortgage cost planner to support your overall home financing strategy.

Frequently Asked Questions (FAQ)

How accurate is this calculator?

The calculator gives you a reliable estimate based on the information you provide. However, final approval depends on your lender's policies, credit score, and other financial factors.

What is a debt service ratio (DSR)?

DSR is the percentage of your income that can go toward repaying your home loan. Lenders use this ratio to determine if you can handle the repayments comfortably.

Why is there an assessment buffer rate?

Lenders test your ability to repay your loan at a higher interest rate than the current rate. This buffer helps protect both you and the lender from future interest rate increases.

Can I include other debts?

Yes, the calculator allows you to enter multiple debts such as credit cards, car loans, and student loans. These are factored into your borrowing power.

How does it calculate my monthly repayment?

The tool uses a loan interest calculator method to determine how much you'd pay monthly based on your interest rate, loan term, and loan amount.

Does it include first home buyer benefits?

Yes, there’s an option to indicate if you’re a first home buyer. While the tool doesn't apply specific grants, it reminds you of potential benefits like reduced stamp duty or government incentives.

More Home Financing Tools to Consider

Using a Borrowing Power Calculator gives you a strong starting point when planning your home purchase. It supports smarter budgeting and gives clarity on what you can afford—so you’re better prepared when it’s time to apply for your home loan.