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Borrowing Power Calculations: A Guide by BFG


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You might have heard of the phrase ‘borrowing power’ or ‘borrowing capacity’ in the past, or even know your amount, but aren’t sure of how the banks got to that number?

Don’t worry. This article will break down how banks calculate borrowing power to put the lending confidence back into your hands.

In this guide, we will cover:

  • How banks calculate borrowing power for customers across the industry
  • What this means for you
  • How BFG can ensure the best value for you

Any further questions? Contact us via email or call today!

How do the banks calculate your borrowing capacity?

All calculations are the same, meaning all bank customers have identical interest rates and features.

Additionally, each bank has their own online borrowing capacity calculator. They’re all slightly different but their general features are the same, including:

  • If the loan is for yourself or includes other participants
  • Dependents
  • If it’s a residential or an investment property
  • Pre-tax income and other sources of income (or your partner’s, if applicable)
  • Expenses, including living, existing home loan repayments, additional loan repayments, other commitments and credit card limits.

Once completed, the calculators will provide you with your final amount depending on the information provided.

However, this figure is an estimate.

It assumes interest is stagnant over the loan’s lifetime, so take your final borrowing capacity with a grain of salt.

So you have your borrowing power, where to go from here?

After calculating your amount, banks direct users to other calculators or encourage talking to a lending specialist.

These calculators include stamp duty and repayments- which are also available on our website, amongst others.

If you want to meet a specialist, you will need to make an appointment with your current bank.

For self-employed workers, we highly recommend that you bring the following to the appointment for home loan applications:

  • Your most recent personal and business tax returns and notice of tax assessment
  • Proof of your ABN (Australian Business Number) being registered for at least two years
  • Most recent business financial statements, depicting the last two consecutive years’ profit and loss from the economic impact of COVID-19

How you can get the best value with BFG

At BFG, we compare and negotiate loans from over 30 lenders to find the best deal for you.

By working with a mortgage broker like us, you’ll receive tailored information tailored to ensure you don’t miss out on any benefits.

And with us, you also give back. When we make a home loan, we invest up to half of the profits into our partner charities addressing social issues in Australia and internationally. Each investment is made in the name of our customers and in turn, they make a tax-deductible, tangible difference.

If you have any further questions or concerns regarding your borrowing power, don’t hesitate to contact our brokers. We’re always ready and happy to help.

Disclaimer: The information provided is general in nature and does not constitute financial advice. Please speak to us for recommendations on your individual circumstances and requirements.

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