# Borrowing power calculator

Description

This calculator is designed to give you an estimate of how much money you can borrow from a lender. Note that the borrowing power is calculated on a custom model which can differ from lender to lender. The purpose of this calculator is to merely give an indication of what a lender could offer you, based on some of your basic incomes and financial commitments. You’ll only know how much you can borrow for certain when you apply and receive conditional approval for a maximum borrowing amount on a loan.

Assumptions

- It does not take into account any possible fees i.e. up-front fees or ongoing fees.
- Interest rate does not change over the loan term.
- Interest is calculated by compounding on the same repayment frequency selected, i.e. weekly, fortnightly, monthly. In practice, interest compounding frequency may not be the same as repayment frequency.
- It is assumed that a year consists 26 fortnights or 52 weeks which is counted as 364 days rather than 365 or 366 days.
- No rounding is done throughout calculation whereas repayments are rounded to at least the nearer cent in practice.
- Buffer or Extra Interest Rate: In order to avoid the risk of interest increasing, many lenders apply a buffer / extra interest rate to calculate borrowing power but the repayments and total interests payable are still calculated without buffer rate.
- The borrowing Power total is calculated at the greater of the Interest rate input + a buffer of 3% or a fixed floor rate of 5.75%
- The greater of the estimated Living Expenses input, or a default Household Expenditure Measure amount which is implemented in many Lenders serviceability calculations, is used to calculate the Borrowing Power amount.