Serviceability: how lenders stress-test repayments

The buffer, in dollars

Serviceability is the test of whether you could still repay a loan at a rate materially higher than the one you are offered. APRA reconfirmed the buffer at 3 percentage points in May 2026, so a loan quoted at 5.94 per cent is assessed at around 8.94 per cent — and most lenders also carry a minimum floor rate, applying whichever of the two is higher.

On a $750,000 loan over 30 years, that is the difference between a repayment of roughly $4,467 a month and roughly $6,000. The lender needs to see that the second figure still leaves a surplus after benchmarked living expenses and every other commitment. That $1,530 a month of assumed headroom is the entire reason your capacity comes back lower than your household budget says it should be.

The buffer is a margin of safety rather than a forecast, and it applies at origination. That is why a borrower whose repayments have already risen three times was never re-tested, while a borrower refinancing the same loan is tested from scratch.

What survives on the income side

Base salary is generally taken in full where two recent payslips and matching bank credits support it. Anything less predictable is discounted. Overtime, bonus and commission are commonly shaded to around 80 per cent and often need two years of history before any of it counts at all. Residential rental income is typically shaded to 70 to 80 per cent to allow for vacancy, management fees, rates and maintenance.

Self-employed income is reconstructed rather than accepted. The common baseline is two years of tax returns with notices of assessment, adjusted upward by permitted add-backs — depreciation, genuine one-off expenses, some superannuation contributions, interest on debt being refinanced. Not every expense line is reversible and lenders disagree about which ones are, which is why an identical set of returns produces materially different capacity at two banks.

Family tax benefits, child support, government allowances and second-job income are all policy questions rather than yes-or-no ones. The honest summary is that the more of your income arrives on an irregular schedule, the more the choice of lender decides the outcome.

The expense side, and why declaring less does not help

Declared living expenses are compared against a benchmark — the Household Expenditure Measure is the one most often named — scaled for postcode, income band, household size and dependants. Where your declared figure falls below the benchmark, most lenders assess on the benchmark. Writing down an implausibly low number does not lift capacity; it invites an assessor to read your statements line by line.

They read them anyway. Ninety days of transactions is the standard sample, and a declared grocery budget that does not match the card spend, a gambling pattern, or regular transfers to an account you did not disclose all cost more in credibility than the dollars involved. Buy-now-pay-later arrangements are treated as ongoing commitments by most lenders even where the balance is small.

Commitments are assessed on limits, not balances

Credit cards are assessed on the limit, and on a notional minimum repayment against that limit — commonly somewhere in the range of 3 to 3.8 per cent of the limit each month, which is lender policy rather than regulation. A $30,000 limit can therefore consume more than $1,000 a month of assessed capacity while carrying no balance at all.

Other lenders’ home loans are assessed at their own buffered rate rather than the rate you are actually paying, so an investment loan sitting on a sharp fixed rate elsewhere can still be tested near 9 per cent. HECS-HELP is treated inconsistently: some lenders exclude the compulsory repayment where the balance will clear within a defined period, others apply the full assessed repayment for as long as any balance exists.

Why two identical payslips get different answers

Because the overlays are where the decision actually happens. Probation and casual tenure rules, the number of dependants that triggers a higher benchmark, whether a postcode sits on a restriction list, minimum apartment sizes, high-density exclusions, whether negative gearing benefits can be added back, whether a HECS-HELP repayment is excluded — none of that appears in an advertised rate, and all of it is lender-specific.

The result borrowers find hardest to accept is that a decline is rarely about the number on the payslip. A high income alongside large card limits, several dependants and a thin buffer can fail where a lower income with no liabilities passes. What is being measured is residual cashflow after the stress test, not gross earnings.

What moves the number, roughly in order of effect

Reduce or close credit card limits first, because it costs nothing and takes effect as soon as the lender has written confirmation. Then retire small amortising debts: at current assessment rates, a $500 monthly car repayment is worth broadly $70,000 of borrowing capacity. Consider the loan term if you are near the top of your range, understanding that a fresh 30-year term buys capacity today and costs interest for a decade. Add a co-borrower only after modelling what it does to their future borrowing.

What does not work: lodging with four lenders to see which says yes, understating expenses, or leaving an undisclosed debt for the assessor to find in the statements. Fix the file first, then let one lender read a clean version of it.

Before you rely on a capacity figure

A public calculator applies one generic formula. A lender applies its own engine, its own benchmark tables and its own overlays, and on the same file the spread between the most and least generous lender is routinely six figures. If a specific purchase price matters to you, the number worth having is the one produced by an engine that will actually assess the application.

The rates, shading ranges and repayment figures above illustrate how assessment works as at September 2026. They are not any lender’s policy and not a quote — Azure Home Loans can run your scenario through real lender calculators, but nothing on this page is an approval or an offer of credit.