How Much Can I Borrow?
The ‘How much can I borrow?’ calculator takes your income and expenditure and provides an accurate indication of how much you can afford to borrow.
It combines the exact method used by the serviceability calculators of three banks to find out whether you would be eligible for a home loan.
How can we get you a better deal?
If you have used another online calculator, you may have realised that most do a general assessment of your income and expenses. They don’t use the same methods used by the banks!
How is the ‘How much can I borrow?’ calculator unique?
Our online calculator takes a very different approach to help you to find the most suitable loan:
- It compares three banks in one go.
- It uses the actual calculation methods used by the lenders’ credit departments.
- It can change the loan structure to work out your maximum borrowing power.
- It takes into account advanced features such as fixed rates, negative gearing, interest only periods and your family size.
In fact, the calculator is so accurate that it even copies small errors in the tax rates used by some of the banks!
If you would like to apply for a loan then please fill in our free assessment form or call us on 1300 889 743 and one of our mortgage brokers will provide you with an obligation free quote. We have extensive knowledge of lender serviceability and criteria, so we can provide you with an accurate and competitive assessment of how much you can afford to borrow.
How can I improve my borrowing power?
Your borrowing power will depend on your income, family size, location, current debts, type of loan and the lender that you choose.
The easiest way to increase your borrowing power is to choose a lender that can lend more for someone in your situation. Some banks are conservative when lending to investors, some use higher living expenses in their assessment and others will lend you less if you have an interest only loan.
However you can also change your situation to improve your borrowing capacity.
How do I use the 'How much can I borrow?' calculator?
The calculator can be completed in three easy steps:
- Input your household details.
- Input your income details.
- Input your expenses and how much you would like to borrow. Commitments can include any current home loans you have, credit cards, personal loans and car loans.
Once all your details are completed, you can enter your email address and then press ‘Calculate.’ The calculator will then show the maximum amount you can borrow and will email you a copy of the results.
If you are unsure of what to enter in the calculator, simply hover your cursor over the question mark for further details.
So are you ready to apply for a home loan? If you send us your payslips and other documents then we can calculate the exact amount that you can afford to borrow for a home or investment property. Call us on 1300 889 743 or fill in our free assessment form to speak to one of our mortgage brokers.
Are the calculator results accurate?
This calculator uses the exact same method used by the banks! It works for people in a normal situation with no lending policy exceptions. It is extremely accurate, even for investors with negative gearing, and other complex situations.
When looking at the results, you may have noticed there are a number of items that differ from lender to lender.
Tax and Medicare rates
Some banks have errors in the tax rates that they are using. They are usually very minor errors, however we have copied those errors into our calculator so that we get the same results as the banks.
If you have an investment loan with negative gearing benefits then the differences may be even larger. All banks either calculate negative gearing benefits using the same method as the tax office or they use a more conservative method. It’s not that one bank’s method is wrong, it is just that some are more conservative than others.
Each bank has their own method of estimating the living expenses for your family. These are the day to day expenses that you have excluding tax, rent and your debt repayments. In actual fact each bank uses the higher of your estimated living expenses and their calculator’s estimate for a family of your size.
Most banks will use the actual rent you are paying or the actual repayments on any personal loans in their assessment. However most lenders will check to make sure you can afford your home loan even if you max out our credit cards. Not every lender assesses your situation in this way and they differ in the repayments they calculate for your credit card debt.
Lenders typically calculate your repayments using an assessment rate which is 1.5% to 2.0% higher than the actual rate on your mortgage. This ensures that you can still afford the loan if interest rates increase. The assessment rate can vary depending on if the loan is a new or existing loan and on the loan product chosen. Features such as interest only repayments are also assessed differently by different banks.
Some lenders require you to have surplus funds left over, known as a buffer, to further reduce the risk that you cannot afford your repayments. This is a conservative method of assessing whether or not you can afford a loan as they have already used a higher interest rate than the actual rate that you are paying.
Apply for a home loan
If you wish to find out how much you can borrow with a specific lender, talk to one of our experienced mortgage brokers. Please fill in our free assessment form or call us on 1300 889 743 and we will help you to calculate how much you can borrow.
Are there different methods of calculating serviceability?
There are three different methods that lenders use to calculate your serviceability:
- Net Surplus Ratio (NSR),
- Debt Servicing Ratio (DSR), and
- Surplus / Uncommitted Monthly Income (UMI).
They differ in how they weigh up your income and expenses, and the way they display the result. The DSR method was commonly used in the past however is too simple and tends to be inaccurate for property investors or for people earning over $200,000 or under $30,000.
Why serviceability can be tough for investors
In order to cool down conceivably unsustainable growth in the property market, one of the first levers that the Australian Prudential Regulation Authority (APRA) pulls is to restrict lending to investors.
Banks usually respond to this by making borrowing power calculations a lot more conservative.
In the past, your serviceability was assessed at the actual repayments you would pay every fortnight or month.
For example, for a $200,000 interest loan at 3.5% per annum, the banks would just need to see that you could afford $7,000 a year or $583 a month.
Under tighter serviceability rules, your bank may assess your borrowing power at principle and interst (P&I) at 6.00% or even higher.
So on that same loan amount, you would need to show a sufficient income to debt ratio to afford $12,000 per annum or $1000 per month.
That’s almost double what you actually need to pay per month!
How can a broker help investors?
A strategy that our brokers often employ with their clients is to go with a bank at a high serviceability rate for 2-3 properties and then buy 2-3 more properties using a non-bank lender.
Some non-bank lenders aren’t regulated by APRA which means they don’t need to adhere to serviceability calculation rules.
Despite the fact that you’ll be charged a slightly higher interest rate, it’s a strategy that may help you to significantly grow your investment portfolio.
Of course, you should discuss your situation with your mortgage broker to ensure that you have the right mortgage strategy for your investment plans.
Which lenders use serviceability?
The following lenders use either the NSR, DSR or UMI method:
- Adelaide Bank
- Advantage (Formerly known as Challenger / Interstar)
- Australian First Mortgage (AFM)
- Australian Secured & Managed Mortgages (ASMM)
- Australian Unity
- Bank of Queensland (BQLD)
- BankWest (BW)
- Better Mortgage Company (BMC)
- Commonwealth Bank of Australia (CBA)
- Heritage Bank (Formerly a Building Society)
- Homeloans Limited
- Homeside Lending (A division of NAB)
- ING Direct
- LaTrobe Financial
- Liberty Financial
- Loan Ave
- Mainstream Capital
- Merchant Mortgages
- MKM Capital
- Mortgage Asset Services (MAS)
- National Australia Bank (NAB)
- Paramount Mortgage Services
- Pepper Home Loans
- RAMS Home Loans
- St George Bank (StG / SGB)
- Suncorp Metway
- The Rock Building Society
- Westpac Bank (WBC)
Although our ‘How much I can borrow?’ calculator doesn’t take all of these lenders into account, it does compare three of the top lenders. The amount that you can borrow can vary significantly between different banks.
If you would like a borrowing power quote for a specific lender then please contact one of our mortgage brokers on 1300 889 743 or fill in our free assessment form.
What are assessment rates / floor rates?
Banks don’t simply assess your borrowing capacity based on their standard variable rate when you apply for a home loan.
Their actual assessment rate will be a higher “floor” rate as a way of mitigating their risk if interest rates were to suddenly rise.
This can have a serious impact on your ability to borrow the amount you need but not all lenders apply the same serviceability rules.
You can check out the ‘What Is An Assessement Rate?’ page for more details.
Whilst we try to be as accurate as possible, the results shown in the ‘How much can I borrow?’ calculator are estimates only. It is provided for illustrative purposes only and is based on the accuracy of the information provided.
It does not constitute a loan approval, quote or an offer to lend. The calculator is not intended to be relied on for the purposes of making a decision in relation to a financial product. The calculator does not assume changes in the cost of living over time or your actual living expenses which may differ from those calculated by the banks.
Code errors or delays with updating the calculator may cause your result to be inaccurate. You should obtain a formal approval from a lender before making any offer on a property or any financial decision that relies on a new mortgage.