Purchasing power is the maximum property price you can realistically afford — your borrowing capacity plus your deposit, minus the cost of buying. It's the number that actually matters when you're house-hunting, not the loan pre-approval letter on its own.
Why borrowing capacity isn't your purchasing power
When a lender pre-approves you for a $700,000 loan, that's the loan amount. It is not the property price you can buy.
A buyer with $700,000 borrowing capacity and $150,000 deposit will not buy an $850,000 property. The deposit isn't going entirely into the property — a chunk has to cover stamp duty, conveyancing, inspections, loan fees and settlement adjustments. In NSW, on an $850,000 owner-occupier purchase, those costs total roughly $42,000. So the effective deposit toward the property is $108,000, and the real purchasing power is closer to $808,000.
This calculator does that maths automatically. You enter your borrowing capacity and total deposit, pick the state, and it deducts stamp duty (state-aware) and standard purchase costs to give you the realistic ceiling.
The cost stack on every Australian purchase
Most buyers underestimate purchase costs because their head is full of the deposit number. The realistic cost stack:
- Stamp duty (transfer duty) — by far the biggest. 3–5% of purchase price for most owner-occupiers, 0% to 7% for investors and foreign buyers depending on state.
- Conveyancing or solicitor fees — $1,500–$3,000 depending on complexity and state.
- Building and pest inspection — $500–$800 combined for a single property.
- Loan establishment and valuation fees — $300–$1,000 depending on lender; sometimes waived as part of an introductory offer.
- Mortgage registration and title transfer — typically a few hundred dollars in government fees.
- Settlement adjustments — water, council rates and strata levies pro-rated to settlement date; adds a small variable cost.
For a typical owner-occupier purchase, total non-deposit costs are 5–6% of the purchase price. Investors should budget 6–8%. Foreign buyers can hit 12–15% once the surcharge is applied.
How to maximise your purchasing power
If you've used the calculator and the number isn't what you wanted, the levers are:
- Borrowing capacity — different lender, larger borrower (e.g. add a guarantor or co-borrower), restructure existing debt, increase income.
- Deposit — FHSS Super Saver Scheme, gift from family, sale of an existing asset.
- Stamp duty — buy in a different state, qualify for FHB concession, buy off-the-plan in VIC under the temporary expanded concession (running to October 2026).
- Capitalise stamp duty into the loan — only if LVR allows. Increases borrowing but moves duty out of your deposit budget.
For investors specifically, claiming negative gearing benefits doesn't change purchasing power directly, but the after-tax cashflow modelling matters once you're holding the property. The negative gearing calculator covers that piece.
Pre-approval reality check
Banks pre-approve based on borrowing capacity, not purchasing power. Two practical implications:
- A pre-approval letter for $700,000 doesn't mean you can buy a $700,000 property — you still need the deposit to cover the gap and the costs.
- Pre-approval doesn't account for whether the property valuation will support the loan. If you offer $850,000 and the bank's valuer comes in at $815,000, the bank will only lend on $815,000 — you fund the gap or walk.
Use this calculator before you start inspecting. It saves you from falling in love with houses outside your real purchasing range.
Frequently asked questions
How is purchasing power different from borrowing capacity?
Borrowing capacity is what the bank will lend you. Purchasing power is how much house you can actually buy with that loan plus your deposit, minus the costs of buying — stamp duty, conveyancing, lender fees, inspections. On a $700,000 borrowing capacity with a $150,000 deposit in NSW, your real purchasing power is closer to $810,000 once $40,000+ of stamp duty and other costs are deducted from the deposit. The bank isn't going to lend extra to cover the duty.
What costs reduce my purchasing power?
Stamp duty is the largest by far — typically 3–5% of the purchase price for owner-occupiers, more for investors and foreign buyers. Conveyancing or solicitor fees ($1,500–$3,000), building and pest inspections ($500–$800 combined), loan establishment and valuation fees ($300–$1,000), title transfer and mortgage registration fees (a few hundred dollars), and a contingency for adjustments at settlement. Budget 5–6% of purchase price for total purchase costs in most states.
Can I capitalise stamp duty into the loan?
Sometimes. If the resulting loan-to-value ratio (LVR) stays within your lender's cap (usually 95%, occasionally 98% with LMI), you can borrow more to cover stamp duty. The trade-off: a higher loan, higher repayments, and interest on the duty for the life of the loan. It's a cashflow tool, not a saving. The calculator can model both scenarios.
What if I'm a first home buyer?
FHB stamp duty concessions vary dramatically by state. In NSW you may pay zero duty on a property up to $800,000 and a partial concession up to $1m. VIC has full exemption to $600k and concession to $750k. The calculator applies the relevant concession when you toggle FHB status — you'll often see your purchasing power jump by $30,000–$70,000.
Should I use my full deposit?
Probably not. Most buyers should hold back a buffer of 3–6 months of repayments and living expenses for emergencies, plus moving costs and immediate post-settlement spending. Calculating purchasing power based on every dollar you have is a recipe for stress in the first year. Deduct your buffer first, then run the numbers.
How does this work for investors?
Investor purchasing power calculations differ in two ways: (1) stamp duty is usually higher because investor rates apply with no FHB concessions, and (2) lenders often apply a different LVR cap and serviceability rate to investment loans. The calculator reflects the duty difference; check with your lender or broker for the LVR side.
Why does my borrowing capacity change so much between lenders?
Lenders use different serviceability rates (the assessed rate, typically 2–3% above your contract rate), different living expense floors, and different treatment of HEM (Household Expenditure Measure) versus your declared expenses. Two lenders can produce $700k vs $900k borrowing capacity figures on the same income. Once you know your true borrowing capacity, this calculator turns it into a real purchase price ceiling.
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Last updated: 2 May 2026