1. What is Westpac Borrowing Power?

Westpac Borrowing Power refers to the maximum loan amount a borrower can obtain based on their financial capacity. It's calculated using the formula: (Income - Expenses) / Servicing Rate, which helps determine how much you can borrow for a home loan while maintaining financial stability.

2. How Does the Calculator Work?

The calculator uses the Westpac borrowing power formula:

Where:

• \( Income \) — Total monthly income in AUD
• \( Expenses \) — Total monthly expenses in AUD
• \( Servicing\ Rate \) — Westpac's servicing rate with buffer (typically around 0.075)

Explanation: The formula calculates your maximum borrowing capacity by determining your disposable income and dividing it by the bank's servicing rate, which includes a buffer for interest rate rises.

3. Importance of Borrowing Capacity Assessment

Details: Accurate borrowing capacity assessment is crucial for determining how much you can afford to borrow, ensuring you don't overextend yourself financially, and helping you plan your home purchase within your means.

4. Using the Calculator

Tips: Enter your total monthly income in AUD, total monthly expenses in AUD, and the current servicing rate (typically 0.075-0.085). All values must be valid positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What is the typical servicing rate used by Westpac?
A: Westpac typically uses a servicing rate between 0.075-0.085, which includes a buffer for potential interest rate increases.

Q2: What expenses should be included in the calculation?
A: Include all regular monthly expenses such as living costs, existing loan repayments, credit card limits, and other financial commitments.

Q3: Does this calculation include other borrowing factors?
A: This is a basic calculation. Actual borrowing capacity may also consider credit history, loan term, interest rate type, and other individual circumstances.

Q4: How often should I reassess my borrowing capacity?
A: You should reassess whenever your financial situation changes significantly, such as income changes, new expenses, or when interest rates change.

Q5: Is this calculator specific to Westpac only?
A: While based on Westpac's methodology, the calculation principles are similar across most Australian lenders, though specific rates and criteria may vary.