What is a serviceability assessment?
Last updated: 06 October 2025 | Estimated read time: 2 Minutes
When applying for a home loan, one of the key steps is a serviceability assessment. This is where your lender looks at your financial situation to determine whether you’re likely to be able to meet your loan repayments, both now and into the future.
It’s not just about how much you earn. Lenders also consider your expenses, liabilities, and other commitments to get a full picture of your borrowing capacity.
What does serviceability mean?
In simple terms, serviceability refers to your ability to repay or service a loan based on your income and expenses.
Lenders typically calculate serviceability by:
- Reviewing your income
- Subtracting your estimated loan repayments and other expenses
- Applying a buffer to account for potential interest rate increases
They may also use a debt service ratio – the proportion of your income that can reasonably go toward loan repayments.
What is included in a serviceability assessment?
A serviceability assessment takes into account:
- Your income (from various sources)
- Your living expenses
- Existing debts and liabilities
- Number of dependents
- Other financial commitments
This helps lenders understand whether you can comfortably manage a home loan alongside your current lifestyle.
Tip: Lenders often apply a buffer to ensure you could still afford repayments if interest rates rise.
What counts as income?
Income types considered in a serviceability assessment can vary between lenders, but may include:
- Salary and wages (including second jobs)
- Rental income
- Overtime and commissions
- Centrelink payments (e.g. Family Tax Benefit A & B)
Tip: Not all income is assessed at 100%. For example, many lenders will only include up to 80% of rental income. So if you earn $500 per week in rent, only $400 may be factored into your assessment.
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Contributor | Barry Saoud, General Manager, Mortgages and Commercial Lending
Barry joined Pepper Money in July 2021 as General Manager, Mortgages and Commercial Lending. He is responsible for the strategic direction and operating performance across product, credit, and settlements for mortgages, commercial loans, personal loans, and direct sales. Read more.
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