Question 1

How do Australian banks calculate borrowing power?

Accepted Answer

Banks calculate your net income after tax, subtract living expenses (HEM benchmarks), existing debts, and apply a stress-tested interest rate (usually 3% above current rates) to determine your maximum monthly repayment capacity.

Question 2

What is the HEM benchmark used by lenders?

Accepted Answer

The Household Expenditure Measure (HEM) is a minimum living expense benchmark used by Australian banks. If your declared expenses are below HEM, lenders will use HEM instead.

Question 3

How does a partner's income affect borrowing power?

Accepted Answer

Adding a co-borrower or spouse's income significantly increases your combined borrowing power. Most lenders assess joint applications on combined income minus combined expenses.

Question 4

Do HECS debts affect borrowing power in Australia?

Accepted Answer

Yes. Lenders assess your HECS/HELP repayment as part of your monthly obligations, reducing your serviceability. A $50,000 HECS debt can reduce borrowing capacity by approximately $50,000–$80,000.

Question 5

Can self-employed people get home loans in Australia?

Accepted Answer

Yes, but lenders typically require 2 years of tax returns and may use the lower of your last 2 years' income. Some lenders offer low-doc loans for self-employed borrowers with at least 20% deposit.

Annual Income	Est. Borrowing Power	Monthly Serviceability
$60,000	$221,495	$1,400/mo
$80,000	$400,801	$2,533/mo
$100,000	$580,106	$3,667/mo
$120,000	$759,412	$4,800/mo
$150,000	$889,936	$5,625/mo
$200,000	$1,081,107	$6,833/mo

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