Clear definitions of key Australian Australian home loan borrowing power and serviceability terms. Use this glossary alongside our calculator to understand your results.
The regulator of Australian banks and lenders. Sets the 3% serviceability buffer requirement for home loan assessments.
The interest rate lenders use to test if you can afford a loan — your actual rate plus the 3% APRA buffer. Currently approximately 9.25-9.5%.
The maximum loan amount a lender will offer based on your income, expenses and existing debts.
The ratio of your total debt to gross annual income. Australian lenders have tightened scrutiny for ratios above 6x.
A benchmark of minimum living expenses used by lenders when assessing borrowing capacity. Using HEM means lenders assume you spend at least this amount.
Insurance protecting the lender if you default. Required when your LVR exceeds 80%. Can cost $10,000-$30,000+.
Your loan amount as a percentage of the property value. Below 80% avoids LMI. Below 60% attracts best rates.
Investment losses that can offset other income for tax purposes — affects both borrowing power calculation and investment returns.
Conditional approval from a lender confirming how much they will lend, subject to property valuation and final checks.
A lender's test of whether your income can service the loan repayments at the assessment rate with comfortable surplus.
Full loan approval after property valuation and all conditions are met. Different from pre-approval.
Now that you understand the terminology, use our free Borrowing Power Calculator to calculate your results. All terms above appear throughout the calculator and our guides.
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