How Much House Can You Actually Afford?

The amount a bank is willing to lend you and the amount you can comfortably afford are two different numbers. Confusing them is a costly mistake.

Plantrino Guides · Updated 2026 · About a 9-minute read

When buyers ask "how much can I afford?", they often mean "how much will a lender give me?" Those are not the same question. A bank's maximum is a ceiling based on its risk; your true affordability is about the life you want to live while repaying. This guide explains the difference and how to find your own number.

What the Bank Will Lend vs. What You Can Afford

A lender assesses your borrowing capacity — the largest loan it is prepared to offer. It does this by looking at your income, your existing debts, your expenses, and a buffer for interest rate rises.

But borrowing capacity is a maximum, not a recommendation. Borrowing right up to it can leave you "house poor" — technically a homeowner, but with so little left each month that holidays, savings, and small freedoms disappear. True affordability is the repayment that fits your life comfortably, and it is usually below the bank's ceiling.

The Factors That Decide Affordability

• Your stable income — reliable, ongoing income, not occasional or uncertain amounts.
• Your existing debts — car loans, credit cards, and other repayments all reduce what is left for a mortgage.
• Your real living expenses — an honest look at what your life actually costs, not an optimistic guess.
• Your deposit — a larger deposit means a smaller loan and smaller repayments.
• Interest rates — the rate directly sets the repayment, and rates can rise.

A Common Guideline

One widely used rule of thumb suggests keeping home loan repayments to no more than about 30% of your gross income. Beyond roughly that level, households are sometimes described as being in "mortgage stress," with little room left for everything else.

It is only a guideline, not a law — some people comfortably spend more, others should spend less — but it is a useful sanity check. If a purchase would push repayments well beyond this share, it is worth pausing.

A Worked Example: From Repayment to Price

The most reliable direction to work is backwards — from a comfortable repayment to a price, not the other way around. Suppose a couple takes home 9,000 a month and decides, from their actual budget, that 2,700 a month is a repayment they could sustain without giving up saving entirely.

Using an illustrative rate of 6% over 30 years, a loan of about 600,000 costs roughly 3,600 a month — too much. Around 450,000, the repayment lands near their 2,700 target. Add their deposit of, say, 120,000, and the raw purchasing power is about 570,000. But the price they can pay is less than that, because stamp duty and buying costs come out of that pool before a single dollar reaches the house. Depending on the state, that can pull the realistic price down by tens of thousands.

Run the same steps with your own numbers and today's actual rates in the calculator — the arithmetic is the point, not the illustrative figures. Notice the order: budget decided the repayment, the repayment decided the loan, and the loan (plus deposit, minus costs) decided the price. At no point did the bank's maximum decide anything.

The Australian Extras

A few local features change the affordability picture in Australia. Stamp duty varies by state and can be one of the largest single costs of buying — our stamp duty guide covers how it works. A deposit under 20% usually triggers lenders mortgage insurance (LMI) — a premium that protects the lender, not you, and effectively raises the cost of buying early rather than saving longer. First home buyer schemes — grants, duty concessions, or low-deposit programs — exist and change often, differ by state, and carry conditions, so check the current rules for your state before counting on them. And when lenders assess your application, they test the repayment at a rate above the one you will actually pay — a serviceability buffer of a few percentage points — which is why your borrowing capacity may be smaller than an online repayment calculation implies.

Do Not Forget the Other Costs

Affordability is not only the monthly repayment. Owning a home carries ongoing costs that renting does not: council rates, building insurance, maintenance and repairs, and possibly strata or body corporate fees. Maintenance alone is often estimated at around 1% of the property's value per year. A repayment that looks affordable in isolation can become a strain once these are added.

Finding Your Own Number

• Start from your real budget, not the bank's maximum. Decide what repayment you could pay every month without strain.
• Subtract the other ownership costs so you are comparing like with like.
• Stress-test against higher rates to be sure the number holds up.
• Leave room for life — savings, emergencies, and the things that make a home worth having.

Frequently Asked Questions

How much house you can afford is not the bank's number — it is yours. Start from a repayment that fits your real life, add the ongoing costs of ownership, stress-test it against higher rates, and keep room for everything that is not the mortgage. A home should support your life, not consume it.