Australia Home affordability calculator

How borrowing power works (Australia)

Australian lenders assess serviceability rather than a simple ratio — your income minus living expenses, existing commitments, and a regulatory buffer.

The HEM and the 3% buffer

Living costs are estimated using the Household Expenditure Measure (HEM) (or your declared expenses, whichever is higher). APRA requires lenders to add a serviceability buffer of 3% — you must be able to repay at your rate plus 3%. At a 6% offered rate, you're assessed at 9%.

Worked example

$90,000 income, modest expenses:

• Net monthly income after tax and HEM living costs leaves the surplus available for repayments
• Assessed at rate + 3% buffer, that surplus supports a smaller loan than the headline rate implies
• Roughly a $450,000–$500,000 loan is typical for a single applicant on this income with low expenses

Deposit, LMI and schemes

A deposit under 20% usually triggers Lenders Mortgage Insurance (LMI), a one-off premium protecting the lender. The First Home Guarantee lets eligible buyers purchase with as little as 5% deposit without LMI. Many borrowers use an offset account to reduce interest.

Common mistakes

• Underestimating declared expenses — lenders scrutinise statements against HEM.
• Forgetting the 3% buffer shrinks borrowing power.
• Overlooking stamp duty (varies by state and first-home concessions).

What this doesn't cover

• State stamp duty and first-home concessions
• First Home Super Saver scheme funds
• Self-employed and variable income assessment