We apply the same rules Australian banks use — including the APRA 3% stress test and HEM living expense benchmarks — to estimate your real borrowing power.
A
Your Income
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Employment Type
Income adjustment notice
$
$/mo
We use 75% of gross rent as assessable income. Your investment loan repayment is counted as existing debt. Negative gearing improves your tax position but does not increase your borrowing power in the bank’s assessment.
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Partner Employment Type
Income adjustment notice
B
Your Deposit & Property
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Purchase Purpose
Investment loans typically carry a higher interest rate. We have adjusted the default rate below. Add your rental income details above.
As a TAS first home buyer of an established home, you pay no stamp duty on properties up to $750,000 (valid to 30 June 2026). For new builds, full stamp duty applies but you may be eligible for the $30,000 First Home Owner Grant, paid separately.
C
Your Debts & Expenses
$/mo
💡 Your expenses appear lower than the bank benchmark (HEM) for a household like yours. We have used the HEM figure instead — this is what most lenders will actually apply.
Dependants
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$/mo
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We convert your HECS balance to an estimated monthly repayment using ATO income thresholds. Lenders include HECS in your debt commitments even though it is not a fixed monthly repayment.
This calculator applies the same core methodology Australian banks use to assess home loan applications — not simplified rules of thumb. It models the APRA 3% serviceability buffer, HEM living expense benchmarks, debt-to-income ratio limits, LMI thresholds, and state-based stamp duty.
Step 1 — The APRA 3% Stress Test
Banks do not assess your borrowing capacity at today’s interest rate. By law, they must test whether you could still afford repayments if your rate rose by 3 percentage points. This is called the serviceability buffer, mandated by the Australian Prudential Regulation Authority (APRA).
Example: If today’s rate is 6.10%, your loan is stress tested at 9.10%. On a $600,000 loan over 30 years, that increases the assessed monthly repayment from $3,651 to $4,830. Your income must cover the higher figure — not the rate you actually pay.
Step 2 — HEM Living Expense Benchmark
Lenders compare your declared living expenses against a benchmark called the Household Expenditure Measure (HEM). If your declared expenses are below the HEM for your household type, most lenders will use the HEM figure instead. This calculator does the same.
Household
Low Income < $60k / yr
Mid Income $80–100k / yr
High Income > $160k / yr
Single, no dependants
$2,100/mo
$2,800/mo
$3,800/mo
Single, 1 child
$2,600/mo
$3,500/mo
$4,600/mo
Single, 2 children
$3,100/mo
$4,100/mo
$5,400/mo
Couple, no dependants
$3,300/mo
$4,400/mo
$5,800/mo
Couple, 1 child
$3,800/mo
$5,000/mo
$6,500/mo
Couple, 2 children
$4,300/mo
$5,700/mo
$7,400/mo
Couple, 3+ children
$4,800/mo
$6,300/mo
$8,100/mo
About these figures: The Household Expenditure Measure (HEM) is developed and published quarterly by the Melbourne Institute of Applied Economic and Social Research, using data from the Australian Bureau of Statistics (ABS) Household Expenditure Survey. The actual figures used by individual lenders are proprietary and are not publicly available. The values shown above are indicative estimates based on publicly cited industry ranges. They should be treated as a guide only. Actual bank benchmarks vary by lender, location, and spending profile. — Melbourne Institute ↗
Step 3 — Debt-to-Income Ratio
Your DTI ratio compares your total debt (including the new loan) against your gross annual income. From February 2026, APRA limits banks to approving no more than 20% of new loans to borrowers with a DTI of 6× or more. This is a quota restriction, not an outright ban — but borrowers above 6× face more limited lender options and timing risk.
Step 4 — Your Maximum Property Price
Once we calculate your maximum borrowing power, we add your deposit to arrive at your estimated property price. If your deposit is below 20% of the property value, Lenders Mortgage Insurance (LMI) is added to the loan — which slightly reduces your effective borrowing power and increases your DTI.
What Is the APRA 3% Buffer?
The APRA serviceability buffer requires lenders to assess whether you could still service your loan if interest rates were 3 percentage points higher than today’s rate. The buffer was introduced in 2014 at 2%, increased to 2.5% in 2019, and raised to 3% in October 2021 as property prices surged and household debt reached record levels. Following a macroprudential review in July 2025, APRA confirmed the buffer will remain at 3%. The stress test applies to all new loans and refinances from APRA-regulated lenders. — APRA ↗
What Is the HEM Benchmark?
The Household Expenditure Measure covers basic costs of living: food, clothing, transport, utilities, and modest discretionary spending. It does not include rent, mortgage repayments, private school fees, or private health insurance — lenders assess these separately.
HEM is adjusted for both household size and income level. Higher earners have higher HEM benchmarks because spending patterns differ. In practice, lenders use whichever is higher — your declared monthly expenses or the HEM for your household type and income bracket. Declaring artificially low expenses does not increase your borrowing power; the HEM floor prevents this.
What Is a Debt-to-Income Ratio?
The debt-to-income ratio (DTI) is your total debt divided by your gross annual income. For example, if you earn $120,000 per year and your total debt including the new mortgage is $720,000, your DTI is 6×. The ratio measures leverage, not cash flow — a high income can support a high DTI if cash flow is sound.
From February 2026, under APRA’s updated macroprudential policy, lenders must hold additional regulatory capital against loans at DTI of 6× or more, and may not issue more than 20% of new residential loans above that threshold. This constraint applies separately to owner-occupier and investor lending portfolios — investors are disproportionately affected because investment loans have higher balances relative to income. — APRA DTI announcement ↗
What Is LMI?
Lenders Mortgage Insurance (LMI) is an insurance premium that protects the lender — not you — in the event of default. It is charged when your loan exceeds 80% of the property value (LVR above 80%) and is typically capitalised onto your loan, increasing your total debt. Approximate LMI costs:
LVR Band
Approx. LMI Rate
Example on $600k loan
80–85%
~0.58% of loan
~$3,480
85–90%
~1.36% of loan
~$8,160
90–95%
~2.64% of loan
~$15,840
> 95%
~3.22% of loan
~$19,320
Saving a 20% deposit eliminates LMI entirely. Some lenders offer LMI waivers for specific professions — doctors, lawyers, dentists, and accountants are commonly eligible, typically at LVRs up to 90% without LMI if income thresholds are met.
How to Increase Your Borrowing Power
1
Cancel unused credit cards
Even a $10,000 card with a $0 balance reduces your borrowing power by approximately $30,000–$40,000 because lenders assess the full limit as a potential monthly commitment at 3.8% of the limit.
2
Pay down your HECS / HELP debt
HECS repayments are included in your debt commitments by lenders even though they are not a fixed monthly obligation. A lower balance means lower assessed repayments and more borrowing capacity.
3
Save a larger deposit
Moving from 10% to 20% deposit eliminates LMI costs ($15,000–$25,000+ on a typical loan) and directly increases your property budget. It also improves your DTI ratio and your lender options.
4
Pay off car and personal loans before applying
Each $500/month in existing loan repayments reduces your borrowing power by approximately $60,000–$70,000 at current stressed rates. Clearing these debts before applying makes a material difference.
5
Avoid new credit in the 6 months before applying
New credit enquiries affect your credit score and increase your assessed debt position. Buy now pay later accounts, personal loans, and new credit cards all count — even if unused.
6
Self-employed: lodge 2 years of clean tax returns
Lenders use your tax return figures, not your current drawings. Maximising declared net profit in the 2 years before applying improves your assessed income significantly. A broker experienced in self-employed lending can identify the most suitable lenders for your profile.
Frequently Asked Questions
This calculator applies the core serviceability methodology used by Australian banks: the APRA 3% stress test, HEM living expense benchmarks, and DTI ratio assessment. It will give you a realistic estimate of your borrowing capacity. However, individual lenders have different credit policies, income shading rules, and internal risk appetites. Your actual approved amount may differ. Always speak with a licensed mortgage broker or lender for a personalised assessment.
APRA requires all regulated lenders to assess your ability to repay your home loan at an interest rate 3 percentage points above the actual product rate. This stress test ensures you can still afford repayments if rates rise. The buffer has been at 3% since October 2021. APRA confirmed it will remain unchanged following its July 2025 macroprudential review.
The Household Expenditure Measure (HEM) is a quarterly benchmark published by the Melbourne Institute, based on ABS household expenditure data. Lenders use it as a minimum floor for your living expenses — even if you declare lower expenses, most banks will apply the HEM figure instead. It varies by household size and income. Actual bank HEM values are proprietary; this calculator uses indicative estimates.
Both conditions must be satisfied, but they work differently. NIS — your net income surplus after tax, expenses, and stressed repayments — must be positive. This is a legal requirement under the National Consumer Credit Protection Act and a negative NIS means the loan will be declined regardless of other factors. DTI is now a portfolio constraint: from February 2026, banks can only approve up to 20% of new loans to borrowers with DTI of 6× or more. A DTI above 6× is not an automatic rejection — it means you fall into a rationed pool that depends on the lender’s current quarterly position.
Self-employed borrowers are assessed differently from salaried employees. Most lenders require at least two years of lodged tax returns and use the average net profit across those years as your assessable income. Business expenses, depreciation add-backs, and other adjustments vary by lender. This calculator applies a conservative 80% adjustment to self-employed income, consistent with the approach most mainstream lenders take. Your actual borrowing capacity may be higher or lower depending on your tax return profile. A mortgage broker experienced with self-employed applicants can help you identify lenders whose policies suit your situation.
Rental income increases your assessable income, which helps both your NIS and DTI. However, lenders only count 75% of gross rent as assessable income to allow for vacancy and management costs. At the same time, your investment property loan repayment is added to your existing debt commitments. If your property is negatively geared — meaning the loan repayment exceeds rental income — your borrowing power for a new loan will be reduced. The tax benefits of negative gearing do not improve your bank serviceability assessment.
Lenders Mortgage Insurance is an insurance premium charged when your deposit is below 20% of the property price (LVR above 80%). It protects the lender — not you — in the event of default. LMI typically costs between $5,000 and $35,000 depending on loan size and LVR, and is usually capitalised onto your loan. To avoid LMI, save a 20% deposit. Some lenders offer LMI waivers for specific professions including doctors, lawyers, and accountants.
Stamp duty is a state government tax on property purchases, paid upfront at settlement. It cannot be included in your home loan and must be funded from savings separately from your deposit. Rates vary significantly by state and property price. First home buyers receive meaningful concessions in most states — in Tasmania, FHBs purchasing an established home pay no stamp duty on properties up to $750,000 (valid to 30 June 2026). In NSW, there is a full exemption up to $800,000 with a taper to $1,000,000. In VIC, full exemption to $600,000 with a taper to $750,000. In QLD, no duty on established homes up to $700,000. In WA, full exemption up to $500,000 with a taper to $700,000 (metro).
This calculator is for general information purposes only and does not constitute financial, taxation, or credit advice. Results are estimates based on standard Australian bank serviceability methodology and indicative benchmarks. Individual lender policies, credit assessment criteria, and applicable fees will affect your actual borrowing capacity. Tax calculations apply FY2025–26 ATO rates including the Low Income Tax Offset (LITO) and Medicare levy; LMITO is no longer applicable. HEM figures are indicative estimates; actual bank benchmarks are proprietary and vary by lender. Stamp duty figures are estimates and may not reflect recent legislative changes — confirm with your state revenue office. Always seek advice from a licensed mortgage broker, financial adviser, or solicitor before making any borrowing or property decisions. TakeHomePayCalc.com.au does not hold an Australian Credit Licence and does not provide credit advice.