Estimate your home-loan borrowing power the way Australian lenders actually do it — stress-tested at the APRA 3% buffer, with a debt-to-income safety check.
This tool estimates your borrowing power — the maximum home loan an Australian lender might be willing to give you — and turns that into an estimated maximum purchase price once you add your deposit. It mirrors the core of a real bank’s serviceability assessment, which is the test of whether you can comfortably afford repayments. The headline number is shown as a range, because no two lenders calculate it identically. Treat it as a planning figure, not a pre-approval.
The maths runs in five steps, the same order a lender works through.
1. After-tax income. We take your gross household income and apply a simplified FY2025-26 resident tax calculation — the Stage 3 brackets (0% to $18,200, 16% to $45,000, 30% to $135,000, 37% to $190,000, 45% above) plus the 2% Medicare levy — then add any other income you’ve already shaded. For couples we split income evenly across two people before taxing, which roughly reflects two separate tax-free thresholds. This is a deliberate simplification: it ignores HECS/HELP repayments, offsets, salary packaging and private-health surcharges.
2. Living expenses. We subtract the higher of your declared monthly living expenses or an indicative HEM (Household Expenditure Measure) floor for your household size. HEM is a benchmark of sensible minimum spending; lenders won’t let you claim you live on less than it. The HEM figures here are indicative only — every lender licenses its own table that also scales with income.
3. Existing commitments. We subtract your other monthly loan repayments, plus a charge for credit cards. Cards are assessed on your total limit, not your balance, at about 3.8% of the limit per month — so a $10,000 limit costs roughly $380/month of borrowing power even at a zero balance.
4. Monthly surplus. What’s left is the maximum you could put toward a mortgage each month.
5. Invert the loan formula at the assessment rate. This is the crucial bit. Your loan is tested not at the rate you’ll actually pay but at the assessment rate = your rate + the APRA 3.00% buffer. We then reverse the standard amortisation formula to find the largest loan that surplus could service:
P = M × ((1 + r)n − 1) ÷ (r × (1 + r)n)
where P is the loan, M is your monthly surplus, r is the monthly assessment rate (annual ÷ 12) and n is the number of monthly payments (term × 12). A 6.90% loan is therefore tested at 9.90%, which is why your borrowing power feels lower than a basic repayment calculator implies. Your maximum purchase price is then the max loan plus your deposit.
On top of serviceability, we calculate your implied debt-to-income ratio — the proposed loan divided by gross annual income. From February 2026 APRA limits how much new lending banks can write at a DTI of 6.0 or higher (to no more than 20% of new loans). Loans at or above 6× income aren’t banned, but fewer lenders will write them and they draw extra scrutiny. If your estimate pushes DTI to 6 or more, we flag it and trim the headline range accordingly.
This is general information, not advice, and it is an estimate. It omits things real lenders model carefully: HECS/HELP debt, casual or self-employed income shading, rental income and negative gearing, lenders mortgage insurance (LMI) when your deposit is under 20%, family guarantees, and each bank’s individual policy and HEM table. It also ignores upfront costs — stamp duty, conveyancing, building inspections and LMI — which reduce the deposit available for the purchase itself. Two lenders can legitimately differ by $100,000+ on the same applicant.
The 3% buffer is an APRA macroprudential setting, in place since October 2021 and confirmed to remain at 3 percentage points through 2026. The tax figures are the post-Stage-3 FY2025-26 resident brackets — note the 16% bottom rate is legislated to fall to 15% from 1 July 2026, which would slightly lift after-tax income next financial year. The DTI speed limit is the newest lever, live since February 2026. All of these are levers regulators can change, so always sanity-check the current settings before relying on a number — the dated source list is in the disclaimer below.
General information only — an estimate, not financial, tax, credit or legal advice. Figures current as at FY2025-26, reviewed June 2026. Confirm with the ATO / your lender / the relevant state revenue office.
Sources: APRA, “APRA announces update on macroprudential settings” (3% serviceability buffer retained, 2026) — apra.gov.au; APRA, “APRA to limit high debt-to-income home loans” (DTI ≥ 6 limit live from Feb 2026) — apra.gov.au; Australian Taxation Office, “Tax rates — Australian resident” (FY2025-26 brackets) — ato.gov.au; Melbourne Institute / Canstar, “Household Expenditure Measure (HEM) explained” (indicative living-cost benchmark, credit-card assessment ~3.8%/month of limit) — canstar.com.au.