Aussie Home Loan Borrowing Capacity Calculator

Aussie Max Loan Formula:

\[ \text{Aussie Max Loan} = \frac{(\text{Income} \times 5) - \text{Expenses}}{\text{Buffered Rate}} \]

Aussie Max Loan (AUD):

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1. What is the Aussie Max Loan Formula?

The Aussie Max Loan formula is a borrowing capacity calculation method used by Australian home loan providers. It estimates the maximum loan amount a borrower can afford based on their income, expenses, and a buffered interest rate.

2. How Does the Calculator Work?

The calculator uses the Aussie Max Loan formula:

\[ \text{Aussie Max Loan} = \frac{(\text{Income} \times 5) - \text{Expenses}}{\text{Buffered Rate}} \]

Where:

\( \text{Income} \) — Annual income in Australian dollars (AUD)
\( \text{Expenses} \) — Annual expenses in Australian dollars (AUD)
\( \text{Buffered Rate} \) — Interest rate percentage with buffer (% p.a.)

Explanation: The formula calculates borrowing capacity by multiplying income by 5, subtracting annual expenses, and dividing by the buffered interest rate (converted from percentage to decimal).

3. Importance of Borrowing Capacity Calculation

Details: Accurate borrowing capacity calculation is crucial for determining how much you can afford to borrow for a home loan, ensuring financial stability, and avoiding over-commitment.

4. Using the Calculator

Tips: Enter your annual income and expenses in AUD, and the buffered interest rate as a percentage. All values must be valid positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What is a buffered interest rate?
A: A buffered interest rate is a higher rate used by lenders to test your ability to repay the loan if interest rates rise in the future.

Q2: Why is income multiplied by 5?
A: This multiplier is a standard lending practice used by many Australian lenders to determine borrowing capacity based on income.

Q3: What expenses should be included?
A: Include all annual living expenses such as groceries, utilities, transport, insurance, and other regular commitments.

Q4: Is this calculation specific to Aussie Home Loans?
A: Yes, this formula is specifically used by Aussie Home Loans and may differ from other lenders' calculations.

Q5: Should I use this calculation for final borrowing decisions?
A: This calculator provides an estimate. For accurate borrowing capacity assessment, consult with a qualified mortgage broker or financial advisor.