Home Loan Capacity Calculator

Home Loan Serviceability Calculation:

\[ Maximum Loan = \frac{(Monthly Income - Monthly Expenses) \times (1 - Serviceability Buffer)}{Monthly Interest Rate \times (1 + Monthly Interest Rate)^{Loan Term}} \times \frac{1}{(1 + Monthly Interest Rate)^{Loan Term} - 1} \]

Monthly Income:

Monthly Expenses:

Annual Interest Rate:

Loan Term:

years

Serviceability Buffer:

Maximum Loan Amount:

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1. What is Home Loan Capacity Calculation?

Home loan capacity calculation determines the maximum amount you can borrow based on your income, expenses, interest rates, and loan terms. It includes a serviceability buffer to ensure you can still afford repayments if interest rates rise.

2. How Does the Calculator Work?

The calculator uses the home loan serviceability formula:

Where:

\( Monthly Income \) — Your total monthly income
\( Monthly Expenses \) — Your total monthly expenses
\( Serviceability Buffer \) — Additional safety margin (typically 3%)
\( Monthly Interest Rate \) — Annual interest rate divided by 12
\( Loan Term \) — Loan duration in months (years × 12)

Explanation: This calculation determines how much you can borrow while maintaining comfortable repayments even if interest rates increase.

3. Importance of Serviceability Buffer

Details: The serviceability buffer is a crucial safety margin that ensures you can still afford your mortgage payments if interest rates rise. Most lenders require a minimum 3% buffer above current rates.

4. Using the Calculator

Tips: Enter your accurate monthly income and expenses, current interest rates, desired loan term, and the recommended 3% serviceability buffer. Be realistic about your expenses to get an accurate result.

5. Frequently Asked Questions (FAQ)

Q1: What is a serviceability buffer?
A: A serviceability buffer is an additional interest rate margin (typically 3%) that lenders add to current rates to test if you could still afford repayments if rates rise.

Q2: How accurate is this calculator?
A: This provides an estimate based on standard formulas. Actual loan amounts may vary based on lender policies, credit history, and other factors.

Q3: What expenses should I include?
A: Include all regular expenses: living costs, existing loan repayments, credit card limits, and other financial commitments.

Q4: Can I change the serviceability buffer?
A: While 3% is standard, some lenders may use different buffers. You can adjust this to see how it affects your borrowing capacity.

Q5: Does this include other loan costs?
A: This calculation focuses on repayment capacity. Additional costs like stamp duty, legal fees, and lenders mortgage insurance should be considered separately.