Build a monthly affordability scenario

How the borrowing estimate is calculated

The calculator starts with monthly take-home income. It subtracts living and future property expenses, existing debt repayments and the safety margin you choose to preserve. The remainder becomes the maximum monthly repayment available in this household scenario.

It adds the entered percentage-point buffer to the indicative loan rate. The result is the assessment rate. It then converts the affordable monthly repayment into a principal amount using the standard present-value formula for a fully amortising principal-and-interest loan over the entered term.

The displayed repayment at the indicative rate is lower than the assessment repayment when the buffer is positive. The gap shows the mathematical effect of stress testing. It is not spare cash to commit elsewhere: rates, income and costs can move, and lenders may assess a higher floor rate or use different terms.

Indicative purchase price adds the estimated loan to cash available after entered buying costs. The indicative loan-to-value ratio divides the loan by that purchase price. These outputs omit price negotiation, valuation differences, grants, schemes, lenders mortgage insurance and lender rules.

Total interest assumes the indicative rate remains unchanged for the full term and every scheduled monthly repayment is made. Actual variable rates change, and fixed-rate periods expire. Fees, offset balances, redraw, extra repayments and interest timing are not modelled.

What the APRA serviceability buffer means in 2026

On 28 May 2026, the Australian Prudential Regulation Authority confirmed that the mortgage serviceability buffer would remain at 3 percentage points. APRA’s macroprudential setting applies to authorised deposit-taking institutions at a system level. It supports prudent assessment against potential increases in rates and changes in borrower circumstances.

A 3 percentage-point buffer does not mean the interest rate charged to the borrower is 3 percentage points higher. It means a lender assesses repayment capacity at a rate at least that much above the product rate, subject to its framework. A lender may also use a minimum assessment floor, so simply adding three may not reproduce its calculation.

APRA also confirmed limits on the share of new lending at a debt-to-income ratio greater than or equal to six. Those portfolio limits are not a promise that a DTI below six will be approved or a universal ban above six. This calculator reports the proposed new loan divided by entered gross annual income only as context; a lender’s DTI calculation can include other debts and definitions.

Lenders remain responsible for sound credit assessment and responsible lending obligations. Policies differ by income type, employment, dependants, expenses, existing credit limits, loan purpose, property, loan-to-value ratio and product. Borrowing capacity can therefore differ materially between lenders even when the interest rate is similar.

Use stable, verified income rather than a best month

Take-home income should match what reaches the household after tax and regular deductions. For variable pay, casual work, overtime, commission, bonuses or self-employment, use a defensible amount across an appropriate period. A lender may shade or exclude income that the household has received but cannot show is stable.

Gross annual income is not used to create the loan ceiling here because tax and deductions vary. It is used only for DTI. If borrowers have different income types, keep notes showing how net and gross totals were constructed. Do not count a tax refund, one-off bonus or family contribution as permanent monthly income unless it genuinely continues and is acceptable to the lender.

Rental income is rarely equivalent to a guaranteed weekly rent multiplied by 52. Vacancy, management, maintenance and lender shading matter. If buying an investment property, build a separate property cash-flow scenario and test how it interacts with household finances.

Plan for parental leave, retirement, contract expiry, study, medical needs or other foreseeable income changes. A thirty-year term can extend far beyond today’s employment conditions. A lender assessment at application is not a long-term household plan.

Build a complete monthly expense figure

Annual expenses should be divided by twelve and retained in a sinking-fund account. Home repairs are uneven, but a zero long-run repair allowance is unrealistic. Apartments can face special levies as well as routine strata contributions.

The personal safety margin is separate from expenses. It preserves breathing room for forecasting error, rate movements and life events. It does not replace an emergency fund. Decide how many months of essential expenses the household wants available after settlement and keep that cash outside the deposit if possible.

Deposit size is not the same as cash needed at settlement

The cash field should include the amount available for both acquisition costs and the price contribution. Enter known buying costs separately so the calculator subtracts them before forming the indicative purchase price. Costs can include transfer duty, conveyancing, inspections, lender fees, title charges, moving and immediate repairs.

If cash does not cover the entered costs, the calculator stops because there is no positive price contribution in this simplified scenario. Government concessions, guarantees or grants have eligibility and timing rules; add them only after confirming current official terms and cash-flow treatment.

A higher loan-to-value ratio may affect pricing, eligibility and lenders mortgage insurance. LMI generally protects the lender rather than the borrower. Its premium may be paid upfront or capitalised subject to policy, changing the loan and repayment. Obtain an actual lender figure rather than treating the displayed LVR as a quote.

The lender’s property valuation can differ from the purchase price. Lending ratios and available funds may be based on the lower supported value. Keep a reserve for a valuation shortfall and do not waive protective contract conditions without appropriate legal and financial advice.

Run scenarios before speaking with lenders

Begin with the entered product rate and 3-point buffer to understand the current reference. Then raise living costs, reduce variable income and shorten the term. A shorter term reduces the loan amount supported by the same payment but may better match retirement timing.

Next test the household at the actual assessment repayment rather than relying on the lower indicative-rate repayment. Consider a period of one income, childcare, rent overlap, body corporate levies or an urgent repair. The goal is to find a purchase range that remains workable, not the largest number the formula can produce.

Compare at least two lenders or a suitably authorised broker using the same complete facts. Ask which income was accepted, which commitments were counted, the assessment rate, loan term, fees, features and expiry conditions. A pre-approval can be conditional and may expire or change before settlement.

Before committing, read the credit contract and comparison information, obtain conveyancing advice, and understand fixed-rate break costs, offset eligibility, redraw conditions and repayment changes. Moneysmart recommends being realistic and allowing breathing room if rates rise.

Important limits of this borrowing calculator

This tool is not connected to a lender and does not assess credit history, bank statements, identity, property acceptability, postcode policy, guarantors, schemes or responsible lending requirements. It does not produce a credit score or submit an application.

It uses monthly compounding and equal principal-and-interest repayments. Actual loans can calculate interest daily, charge recurring fees and have different repayment timing. Interest-only loans need a separate model because repayments rise when the interest-only period ends.

Tax, benefits and child-support treatment are not calculated. Net income must already reflect the household’s circumstances. Investment tax outcomes depend on ownership, use and current tax law and require appropriate advice.

Use the result as a conversation boundary: “What purchase range works if these numbers are true?” Verify every input, obtain lender-specific assessment and retain a margin between eligibility and personal affordability.