Question 1

How does a borrowing power calculator work in Australia?

Accepted Answer

A borrowing power calculator estimates your maximum home loan by analyzing your income, living expenses, existing debts, and applying lender assessment criteria including a buffer rate (typically 3%) above the current interest rate.

Question 2

How much can I borrow for a home loan based on my income?

Accepted Answer

As a rough guide, you may be able to borrow 5-6 times your gross annual household income. However, actual borrowing power depends on your expenses, debts, credit card limits, and individual lender criteria.

Question 3

How do credit card limits affect borrowing power?

Accepted Answer

Lenders assess your full credit card limit (not just the balance) as a potential debt. They typically calculate 3-3.8% of your total limit as a monthly commitment, which reduces your borrowing power even if you pay off your card each month.

Question 4

Does HECS/HELP reduce borrowing power?

Accepted Answer

Yes, HECS/HELP debt reduces borrowing power because lenders include the compulsory repayments (based on your income) as an existing debt commitment when calculating your capacity.

Question 5

What is DTI and why does it matter?

Accepted Answer

DTI (Debt-to-Income) ratio compares your total debt to your gross annual income. Most lenders prefer DTI under 6. A DTI over 6 may limit your options or require a larger deposit.

Question 6

Why do different lenders give different borrowing power results?

Accepted Answer

Each lender has different assessment criteria, income shading policies, expense benchmarks, and risk appetites. Some lenders are more conservative while others may offer higher borrowing limits for certain borrower profiles.