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. In practice, interest compounding frequency may not be
the same as repayment frequency.
It is assumed that a year consists of 12 months, 26 fortnights, 52
weeks counted as 365 days rather than 364 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: Many lenders apply a buffer/extra
interest rate to calculate borrowing power but the repayments and
total interest payable are still calculated without buffer rate.
The Borrowing Power total is calculated at the Interest rate input +
a buffer of 3%.
The borrowing capacity calculation is based on the living expenses
entered. However, the actual borrowing capacity may vary depending
on the Household Expenditure Measure or other expense benchmarks
used by the lender.
