1. What is the Borrowing Capacity Calculator?

The Borrowing Capacity Calculator estimates your maximum loan amount and total purchase price based on your serviceable income, servicing rate, and available deposit. It helps determine how much you can borrow for a property purchase while considering your deposit's impact on the loan-to-value ratio.

2. How Does the Calculator Work?

The calculator uses the following formulas:

Where:

• \( \text{Serviceable Income} \) — Your monthly income available for loan servicing ($)
• \( \text{Servicing Rate} \) — The lender's required debt service ratio (decimal)
• \( \text{Deposit} \) — Your available deposit amount ($)

Explanation: The calculator determines your maximum borrowing capacity based on your income and the lender's servicing criteria, then adds your deposit to determine the total property price you can afford.

3. Importance of Borrowing Capacity Calculation

Details: Understanding your borrowing capacity is essential for property purchasing decisions, budgeting, and financial planning. It helps you determine what properties are within your price range and ensures you don't overextend financially.

4. Using the Calculator

Tips: Enter your monthly serviceable income, the lender's servicing rate (typically between 0.25-0.35), and your available deposit amount. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What is serviceable income?
A: Serviceable income is your net monthly income after taxes and essential living expenses, which is available for loan repayments.

Q2: What is a typical servicing rate?
A: Servicing rates typically range from 0.25 to 0.35, meaning lenders expect your loan repayments to be 25-35% of your serviceable income.

Q3: How does deposit affect borrowing capacity?
A: A larger deposit reduces the loan-to-value ratio, which may improve your loan terms but doesn't directly increase your borrowing capacity based on income.

Q4: Are there other factors that affect borrowing capacity?
A: Yes, lenders also consider credit history, existing debts, employment stability, and the property's value when assessing borrowing capacity.

Q5: Should I borrow my maximum capacity?
A: It's generally advisable to borrow less than your maximum capacity to maintain financial flexibility and account for interest rate changes or unexpected expenses.