The affordability calculator on our home page does more than most bank calculators. Here is what every input means and how to get the most useful result from it.
Start With Your Income
The first input is your gross annual income — that is your income before tax, as shown on your payslip or tax return. If you have a partner who will be on the loan, add both incomes together.
If you have other income sources — rental income, investment income, freelance work — these can be added in the additional income field. Be aware that lenders will require 2 years of evidence for self-employed or investment income.
Monthly Expenses
This is where most calculators go wrong. The banks use the Household Expenditure Measure (HEM) — a benchmark based on ABS survey data — as the minimum assumed living cost. If your actual expenses are higher, they use your actual expenses.
Our calculator uses your stated monthly expenses directly. Enter a realistic figure — rent, groceries, utilities, subscriptions, dining out, fuel, and any other regular outgoings. Do not forget annual costs like insurance or registration; divide those by 12 and include them.
Being honest here matters. A lender will ask for 3–6 months of bank statements and will identify spending patterns you may have forgotten. Better to know your real borrowing capacity upfront than to be surprised at pre-approval.
Interest Rate
The calculator defaults to a rate close to the current average variable rate for owner- occupiers. You can adjust this to model different scenarios.
APRA (the banking regulator) requires lenders to assess your ability to repay at the current rate plus a 3% buffer. So if you see a rate of 6.2%, you will be assessed at 9.2%. Our calculator applies this buffer automatically — the borrowing capacity result already accounts for the serviceability test. This is why the figure is often lower than what a simple repayment calculator suggests.
Loan Term
The standard in Australia is 30 years. A longer term lowers monthly repayments and increases borrowing capacity, but costs significantly more in total interest. A 25-year term typically saves $80,000–$150,000 in interest on a $600,000 loan but requires higher monthly repayments.
If you plan to pay extra off the loan anyway, start with 30 years and contribute more when you can — the extra payments reduce the loan faster and you retain flexibility during tight months.
Deposit
Enter the deposit you currently have available (or your savings target). The calculator uses this to determine:
- Loan amount — purchase price minus your deposit
- LVR (Loan-to-Value Ratio) — loan ÷ purchase price. Above 80% LVR, LMI applies in most cases.
- Whether you might qualify for a guarantee scheme — if your deposit is 5–20%, you may avoid LMI via the First Home Guarantee.
Understanding the Results
After entering your details, the calculator shows:
- Maximum borrowing capacity — the largest loan you can service at the current rate plus the 3% buffer. This is not the recommended loan amount — it is the ceiling.
- Estimated purchase price — borrowing capacity plus your deposit, giving you a target price range.
- Monthly repayments — what you would actually pay each month at the current rate (not the buffer rate). This is your real cash commitment.
- Affordability ratio — monthly repayment as a percentage of take-home pay. Under 30% is generally considered comfortable; above 35% can become stressful.
Exploring Suburbs
Once you have your purchase price range, head to the Map View to see which suburbs in your target state or city have median prices within your range. Each suburb card shows the median house and unit price, median weekly rent, and an affordability score.
Common Mistakes
- Entering net (after-tax) income instead of gross — the calculator needs gross income to apply the correct tax treatment. Check your payslip for the “gross earnings” or “total taxable income” figure.
- Forgetting existing debts — credit cards, car loans, HECS/HELP debt, and personal loans all reduce borrowing capacity. Each $10,000 of annual debt repayments reduces your borrowing capacity by roughly $50,000–$80,000.
- Using the maximum as the target — borrowing at your absolute maximum leaves no buffer for rate rises, unexpected expenses, or income changes. A comfortable rule of thumb is to target 80–85% of your maximum.
Next Steps
Once the calculator gives you a clear picture, the next step is getting a formal pre-approval from a lender. A mortgage broker can do this across multiple lenders simultaneously — at no cost to you, since brokers are paid by the lender. They can also help you understand which lenders will use your income most favourably, which matters a lot if you are self-employed or on a variable income.