How is property affordability calculated in Australia?

Property affordability in Australia is typically assessed on two levels: what a lender will approve (borrowing capacity) and what you can comfortably repay without financial stress. Lender assessments use your gross income, declared living expenses (or a benchmark, whichever is higher), existing debt commitments, and an assessment interest rate equal to the actual rate plus a 3% buffer (per APRA's serviceability guidelines). Comfortable affordability is a personal calculation that factors in your preferred monthly surplus, savings goals, and lifestyle spending beyond what lenders formally assess. Both numbers matter — the lender's figure tells you what's possible; your comfortable figure tells you what's sustainable.

How much deposit do I need to buy a home in Australia?

The minimum deposit required to buy a home in Australia is generally 5% of the purchase price, though most lenders prefer 10–20%. Deposits below 20% typically require Lenders Mortgage Insurance (LMI), which adds to the upfront cost. A 20% deposit avoids LMI entirely and often unlocks better interest rates. In addition to the deposit, buyers need to cover upfront purchasing costs (stamp duty, legal fees, inspection, and registration), which typically add 3–5% of the purchase price on top of the deposit. First home buyers may access stamp duty concessions or exemptions that reduce the cash required at settlement.

What is the 3% serviceability buffer and why does it apply?

The 3% serviceability buffer is a requirement from APRA (the Australian Prudential Regulation Authority) that instructs lenders to assess a borrower's ability to repay a loan at a rate 3% above the actual rate being offered, or at a minimum floor rate (whichever is higher). The buffer is designed to ensure borrowers can still meet repayments if interest rates rise after settlement. At a current variable rate of 6.29%, lenders assess serviceability at approximately 9.29%. This means borrowers may qualify for a smaller loan than they might expect if calculating affordability based on current rates alone.

What is LMI and do I have to pay it?

Lenders Mortgage Insurance (LMI) is an insurance premium charged to borrowers who take out a home loan with a deposit of less than 20% (i.e. an LVR above 80%). LMI protects the lender — not the borrower — in the event of default and is a cost borne by the buyer. The premium is calculated as a percentage of the loan amount and scales with the LVR: higher LVR and larger loan amounts result in higher LMI premiums. LMI can often be added to the loan (capitalised), meaning it increases the loan balance and therefore the total interest paid over the life of the loan. Some borrowers qualify for LMI waivers through certain professions or government guarantee schemes.

What is the First Home Guarantee (previously First Home Loan Deposit Scheme)?

The First Home Guarantee is a federal government program that allows eligible first home buyers to purchase a home with a deposit as low as 5% without paying LMI. Under the scheme, the government guarantees up to 15% of the loan to the lender, bridging the gap between the buyer's deposit and 20%. The scheme has limited annual places, income thresholds apply, and property price caps apply by state and territory. Eligibility is assessed by participating lenders. Check the current scheme details and place availability through the Housing Australia website or a participating lender. LoanGorilla's brokers can confirm which lenders participate in the scheme.

How does stamp duty affect my affordability?

Stamp duty is a state government tax on property purchases that typically represents one of the largest upfront costs after the deposit itself. On a $700,000 purchase in NSW, for example, stamp duty is approximately $26,290 for a non-first-home-buyer. First home buyers may receive full or partial exemptions depending on the state and purchase price. Stamp duty is paid at settlement and is not included in the home loan — it must be available as cash (alongside the deposit). Underestimating stamp duty is one of the most common reasons buyers are caught short of funds at settlement. This calculator includes a state-specific stamp duty estimate based on your inputs.

What are the other upfront costs of buying a home?

Beyond the deposit and stamp duty, buyers typically face: conveyancing and legal fees ($1,500–$3,000), building and pest inspection ($400–$800), loan application or establishment fees (varies by lender — many now waive these), title registration fees (state-specific, typically $200–$500), and lender's mortgage insurance if LVR exceeds 80%. On a $700,000 purchase, total upfront costs excluding the deposit are commonly $30,000–$50,000. This calculator estimates these costs based on your state, purchase price, and LVR, and presents them as a "total funds needed" figure alongside the deposit.

What counts as income for a home loan in Australia?

Australian lenders typically accept PAYG employment income (salary and wages), self-employment income (usually assessed on a 2-year average from tax returns), rental income (usually at 70–80% of gross rent to allow for vacancies and expenses), Family Tax Benefit A and B, Centrelink parenting payments (sometimes, subject to lender policy), and regular overtime or bonuses (often at 50–80% of the average amount if recurring). Investment income such as dividends and trust distributions may also be accepted. Casual income is generally accepted if the applicant has been in the same role for at least 12 months. Lenders assess the sustainability and stability of income, not just the total figure.

How does having dependants affect my borrowing capacity?

Having dependants reduces your borrowing capacity in two ways. First, lenders increase their Household Expenditure Measure (HEM) benchmark for each additional dependant, reflecting higher estimated living costs. If your declared expenses are below the HEM benchmark for your household size, the lender uses HEM — so more dependants typically means a higher assumed expense floor. Second, childcare costs (if declared as a committed expense) reduce the net income available for loan repayments. The practical impact varies by lender and income level, but each additional dependant can reduce maximum borrowing capacity by $30,000–$80,000 depending on the specific lender's model.

How does LoanGorilla help me find a home loan within my budget?

LoanGorilla compares home loan products from 100+ Australian lenders based on the purchase price, deposit, and loan parameters you enter. Once you know your comfortable purchase budget from this calculator, you can compare rates, fees, LMI options, first home buyer products, and cashback offers across the market in a single search. The comparison has no impact on your credit score. LoanGorilla's mortgage brokers can also help you understand your actual borrowing capacity with specific lenders (which varies by lender's credit policy, not just the standard formula), guide you through the first home buyer grant and guarantee process, and manage your application from comparison to approval.

What Can You Actually Afford? Not What the Bank Will Lend You.

There's a difference between how much a lender will approve and how much you can comfortably afford to borrow — and that gap is where mortgage stress lives. This calculator works from your actual income, expenses, and goals to show your comfortable purchase budget, your maximum borrowing capacity, and the repayment implications of both.

100% Free

Compare 100+ Lenders

No Credit Score Impact

Comfortable Budget vs Max Borrowing

Who this calculator is for

First home buyers working out a realistic purchase budget before they start inspections.
Upsizers and upgraders modelling how a larger mortgage would affect monthly cash flow.
Couples combining incomes for the first time, translating joint income into a purchase price.
Anyone who's been quoted a borrowing capacity by a lender and wants to check whether that number is genuinely comfortable.

What it calculates

Your comfortable property budget — repayments leave room for your chosen cash flow buffer.
Your maximum borrowing capacity — what a lender is likely to approve at +3% APRA buffer.
Monthly repayments at both budgets, plus deposit needed at 80%, 90% or 95% LVR.
LMI estimate where LVR exceeds 80%, plus state-based stamp duty and other upfront costs.
Total funds required at settlement — the real cash you need on the day.

Why it matters

Australian lenders assess serviceability with a 3% interest rate buffer above the current rate — meaning they test repayments at roughly 9%+ on a current 6% loan. That buffer protects borrowers, but lenders will sometimes approve amounts that leave you uncomfortably stretched. Running your own affordability check gives you the number that should drive your property search — independent of what the bank will lend.

Property Affordability Calculator

Borrower 1 — Annual Gross Income$110,000

Borrower 2 — Annual Gross Income (optional)$70,000

Other Monthly Income$0

Monthly Living Expenses$4,500

Existing Debt Repayments (monthly)$0

Total Credit Card Limits$8,000

Lenders assess credit limits, not balances (~3.8%/mo).

Dependants1

Deposit Available$120,000

Interest Rate6.29%

Loan Term30 years

State / Territory

First home buyer

Apply state concessions and grants

Monthly Cash Flow Buffer Preference$600

Surplus you want left after all repayments and expenses.

LVR Preference

Your Affordability

Comfortable purchase budget

$600,000

Loan $480,000 · Repayment $2,968/mo

Maximum borrowing capacity

$600,000

Loan $480,000 · Repayment $2,968/mo

At your comfortable budget

Deposit needed$120,000

Stamp duty (NSW)$21,735

Other upfront costs$2,500

Total funds to settle$144,235

Buffer zone

Stretching from $600,000 to $600,000 adds about $0/mo to your repayment — money that comes out of your monthly cash flow surplus.

Indicative only. Actual borrowing capacity, LMI and stamp duty depend on lender policy and final assessment.

Compare home loans from 100+ Australian lenders

Once you know your comfortable budget, find a home loan that fits it. LoanGorilla compares rates, fees, and features from 100+ Australian lenders — including first home buyer specialists, low-deposit options, and cashback offers — in seconds, with no impact on your credit score.

Compare Home Loans for My Budget No credit score impact. Takes 60 seconds.

How this Property Affordability Calculator works

Comfortable affordability vs maximum borrowing capacity

This calculator produces two distinct outputs: your comfortable purchase budget and your maximum borrowing capacity. They are calculated differently, and the gap between them is deliberate.

Maximum borrowing capacity uses a standard lender serviceability model: net income less living expenses (the higher of declared expenses or a benchmark) less existing debt repayments, divided by the required repayment at an assessment rate of your input rate plus 3% (the APRA buffer). This is the number a lender would likely approve. It does not account for your savings goals, lifestyle spending, or your tolerance for financial pressure.

Comfortable purchase budget works backwards from your stated monthly cash flow buffer: it calculates the maximum repayment you can make while retaining your preferred monthly surplus, then converts that to a loan amount and purchase price at your chosen LVR. This is the number that should drive your property search.

How stamp duty is calculated

Stamp duty (now officially called transfer duty in some states) is a state government tax on property purchases. Rates are progressive — a percentage applied to bands of the purchase price — and vary significantly by state and territory. The calculator applies current state-specific schedules and first home buyer concessions or exemptions where applicable. The stamp duty output is an estimate based on published schedules; confirm the exact amount with a conveyancer or state revenue office before settlement.

How LMI is estimated

Lenders Mortgage Insurance is required on most loans where LVR exceeds 80% (deposit below 20%). LMI protects the lender — not you — if you default. The premium is a percentage of the loan amount, scaled to the LVR band: roughly 0.5% at 85% LVR up to 3.5%+ at 95% LVR on larger loans. LMI can typically be capitalised (added to the loan) or paid upfront. The calculator shows an indicative LMI estimate; actual premiums are set by Helia or QBE and may differ.

How to interpret your results

The gap between comfortable and maximum is the buffer zone — if your comfortable budget is $650,000 and your maximum is $820,000, the additional $170,000 is technically available but comes with higher repayments and a smaller monthly surplus. Entering that zone is a personal decision, not a financial inevitability.
Total funds needed is the most important number on settlement day — borrowers routinely underestimate the cash required. Stamp duty, legal fees, inspection and registration can add $20,000–$60,000+ on top of the deposit on a $700,000–$900,000 home.
The LMI estimate changes your break-even timeline — on a $700,000 purchase at 90% LVR, LMI might add $12,000–$18,000 to the loan. Weigh this against the time it would take to save the additional deposit.
First home buyer entitlements are genuinely significant — state-level grants and stamp duty concessions can reduce upfront costs by $10,000–$40,000+ depending on the state and purchase price.
Your declared living expenses matter more than you think — lenders use the higher of your declared monthly expenses or a benchmark (HEM). If declared expenses are below HEM for your household, the lender uses HEM regardless.

How to strengthen your affordability position

Reduce existing debt before applying. Every dollar of monthly debt repayment directly reduces your borrowing capacity. A $400/month car loan repayment can reduce maximum borrowing by $80,000–$100,000 at current rates.
Close unused credit cards. Lenders assess credit card limits, not balances. A $10,000 limit with a zero balance still reduces borrowing capacity because lenders count ~3.8% of the limit as a committed monthly expense.
Save a larger deposit to avoid LMI. Crossing the 80% LVR threshold eliminates LMI and reduces the loan amount. Even moving from 95% to 90% LVR significantly reduces the LMI premium.
Check your First Home Buyer entitlements in your state. Eligibility, thresholds and grant amounts vary by state and change periodically. Don't assume eligibility — check the current criteria.
Use the comfortable budget as your property search ceiling. Property searches creep upward and auctions are emotional. Set the comfortable budget number in advance and treat it as a ceiling, not a guide.
Factor rate rises into your comfortable budget. Re-run the calculator at a rate 1.0–1.5% above the current rate as a secondary check. Adjusting the budget now is far less painful than adjusting your lifestyle post-settlement.

Example Property Affordability Calculations in Australia

The table below shows comfortable purchase budgets and maximum borrowing capacities for four household scenarios at a 6.29% interest rate, 30-year term, 20% deposit (no LMI), and a $600/month preferred cash flow buffer.

Household Income	Monthly Expenses	Max Borrowing	Comfortable Budget	Repayment (comfortable)
$90,000 single	$3,200/mth	$420,000	$340,000	$2,174/mth
$140,000 couple (joint)	$4,500/mth	$620,000	$530,000	$3,389/mth
$190,000 couple (2 dependants)	$5,800/mth	$760,000	$640,000	$4,092/mth
$250,000 couple (no dependants)	$5,200/mth	$1,100,000	$890,000	$5,692/mth

Assumptions

6.29% p.a. interest rate | 30-year loan term | 20% deposit (no LMI) | $600/month buffer preference.
Serviceability assessment rate = 9.29% (input rate + 3% APRA buffer); HEM applied where declared expenses are below benchmark.
Stamp duty excluded from these figures. All figures rounded. May 2026.

You might also use

Calculator assumptions

Results produced by this calculator are estimates for general planning purposes. Maximum borrowing capacity is calculated using a 3% serviceability buffer above the input interest rate (consistent with APRA guidance), with monthly expenses assessed as the higher of your declared amount or a simplified Household Expenditure Measure (HEM) benchmark adjusted for dependants. The comfortable purchase budget is calculated by working backwards from your stated monthly cash flow buffer preference. Stamp duty calculations use current published rate schedules for each Australian state and territory as at May 2026. First home buyer grant and concession figures use currently legislated amounts and may change. LMI estimates are indicative and based on published premium rate bands; actual premiums are determined by the mortgage insurer and may differ. All upfront cost estimates (legal fees, inspection, registration) are indicative averages and will vary based on property type, location, and provider. All figures in AUD. Results do not constitute credit advice or a credit assessment. LoanGorilla compares home loans from 100+ Australian lenders. Reviewed by the LoanGorilla editorial team — last updated May 2026.