Updated 15 October 2026. General information and illustrative calculations.
Borrowing power is different from your purchase budget
Your purchase budget combines the approved loan with the savings available for the property. Keep buying costs and an emergency buffer separate. A deposit is your contribution to the price; stamp duty and other fees do not buy you equity in the property.
Example: working backwards from your savings
Suppose you have $100,000 in savings and set aside $20,000 for purchase costs and a buffer. That leaves $80,000 towards the price. If a lender approves $520,000, the arithmetic gives a $600,000 purchase budget and an 86.7% loan-to-value ratio, assuming the valuation equals the price. Lenders mortgage insurance or other costs could change the funding needed. The $20,000 allowance is illustrative and may be insufficient for your purchase.
Use the Victorian stamp duty calculator and buying-costs calculator to build your own allowance.
Why lenders test repayments at a higher rate
A lender checks whether repayments remain affordable if rates rise. APRA’s prudential standard requires banks to apply a serviceability buffer of at least 3 percentage points unless APRA determines otherwise. Lender policies and exceptions also matter; this is not a promise that every application is assessed identically.
For a simplified 30-year principal-and-interest calculation, a $3,000 monthly repayment supports approximately $500,375 at 6% p.a., but $372,846 at 9% p.a. This isolates the effect of the interest rate. It is not a borrowing-capacity estimate: tax, expenses, other debts, fees and lender policy have not been assessed. Both calculations assume monthly interest and repayments and a constant rate.
Source: APRA APS 220: residential mortgage serviceability buffer.
Practical ways to review your borrowing position
- Check your regular spending against bank statements and leave room for home ownership costs.
- Review debts and unused credit limits with your broker before changing facilities.
- Keep income evidence current, particularly for variable earnings or self-employment.
- Compare suitable lenders: the same income can receive different treatment under different policies.
- Test repayments at a higher rate and keep a cash buffer rather than aiming automatically for the largest loan.
A longer term can reduce repayments but increase total interest. A smaller property budget may be more comfortable even if a lender would approve more.
From calculator estimate to a personalised assessment
Enter your income, expenses, debts and loan settings in the borrowing capacity calculator. Then bring those figures, your savings and your target property price to Chris Berry. He can review suitable lender policies, identify documents needed and explain the next step towards an application.
Book a free borrowing-power discussion or meet your Melbourne mortgage broker.