How Australian mortgage affordability works
Banks don't just look at your income — they stress-test it. Under APRA rules, every lender must assess whether you could afford repayments at your actual interest rate plus 3%. This means a 6.3% loan is assessed at 9.3%, which significantly reduces what you can borrow compared to what a simple income multiple suggests.
The three things that determine your borrowing capacity
1. Income — total household gross income assessed at the buffer rate
2. Expenses — living costs reduce the repayment capacity lenders will allow
3. Deposit — determines LVR and whether LMI applies
Rough borrowing capacity by income (2026)
| Household income | Approx. max borrow | Monthly repayment | Notes |
|---|---|---|---|
| $80,000 | $380,000 | $2,350 | First home buyer, modest property |
| $120,000 | $580,000 | $3,580 | Typical couple, regional city |
| $160,000 | $780,000 | $4,820 | Dual income, major city outskirts |
| $200,000 | $980,000 | $6,060 | High income, inner suburb |
| $250,000 | $1,230,000 | $7,610 | Professional couple, premium property |
Assumes 6.3% rate, 30-year term, $3,000/mo expenses, 20% deposit. Approximate only.