Working out your budget

Your budget is one of the first things a selling agent will ask about, so it’s worth setting before anyone asks. Build it from your own numbers and keep the limit private. Then every price guide you see becomes something you can test against a number you trust.

Borrowing power, and the buffer behind it

Lenders work out your borrowing power from income, expenses, existing debts and the loan you’re asking for. Then they apply the rule that surprises most buyers: under APRA’s serviceability standard, banks must assess you as if your interest rate were 3 percentage points higher than the rate you’ll actually pay. If your loan is offered at 5.9 per cent, you’re assessed at 8.9 per cent. APRA reviewed the buffer again in 2026 and held it at 3 points, so plan around it.

Three things quietly shrink borrowing power: credit card limits (lenders assess the full limit, not the balance, so cancel or cut cards you don’t use), HELP/HECS repayments, and any existing loans including car finance and buy-now-pay-later accounts. Three months of clean bank statements before applying is worth real money.

Whatever number the bank produces, it is a ceiling, not a target. The bank is testing whether you can repay under stress; it is not testing whether you can repay under stress and have a life. Set your own budget from your real spending, then borrow less than you’re offered. Nobody has ever regretted a 10 per cent buffer of their own.

Deposits: 5, 10 or 20 per cent

Your deposit sets your loan-to-value ratio (LVR), and your LVR decides whether you pay lenders mortgage insurance. LMI protects the lender if you default; you pay the premium, and it buys you nothing. It applies once your LVR goes above 80 per cent, it scales steeply with the loan size and LVR, and most borrowers capitalise it onto the loan, which means paying interest on it for 30 years. Typical premiums on a $750,000 purchase, as at mid-2026:

Premiums vary by lender and insurer, so treat these as ranges, but the shape is universal: the last 5 per cent of deposit you didn’t save is the most expensive money in the deal. The big exception is the federal 5% Deposit Scheme, which lets eligible first home buyers skip LMI entirely; Chapter 3 covers it. A small number of professions (medicine, law, accounting at certain income levels) can also get LMI waived at 90 per cent LVR; ask a broker if that might be you. Our LMI calculator prices it at your deposit.

The upfront costs beyond the deposit

The deposit is the headline, but settlement day has a supporting cast. Budget for all of it before you bid on anything:

• Stamp duty (transfer duty). The big one: a state tax on the purchase, scaled to the price. On a $750,000 established home it ranges from roughly $20,000 to $40,000 for a non-first-home buyer depending on the state. First home buyer concessions can cut it to zero (Chapter 3).
• Conveyancing and searches: $800 to $2,500. Contract reviews, title and council searches, settlement. Engage someone before you make an offer, not after.
• Building and pest inspection: $400 to $800 per property you get serious about. Strata report for units: $250 to $400. Budget for two or three of these across your search; reports on homes you don’t buy are the cheapest insurance in this guide.
• Government registration fees: mortgage registration and transfer fees, typically $200 to $500 combined depending on the state.
• Loan costs: application or settlement fees, $0 to $800 depending on the lender.
• Moving, connections, immediate repairs: $1,000 to $3,000 for most households. More if you’re buying appliances or window coverings, which new builds often lack.

Worked example: a $750,000 purchase

An established house in NSW, bought two ways. Same property, very different cheques:

The first home buyer gets in for a quarter of the upfront cash, but borrows $712,500 against $750,000 of property. A 5 per cent price dip puts that loan underwater on paper. Cheap entry is real; so is thin equity. Both columns are honest, and neither is free. Our stamp duty calculator runs the duty for your state and price.