In our experience, this is the single most expensive misunderstanding we see before exchange: a buyer treats the bank's "you can borrow X" as their shopping budget. It isn't. The bank's number is the most you could repay today; your number is what still works after stamp duty, the other costs, and a bad month or two.
Borrowing capacity vs max purchase price (they're not the same)
Borrowing capacity is what the lender will give you, based on income, debts, expenses, dependents, and the assessed rate. The bank's ceiling.
Max purchase price is what you're willing to pay. It sits below the bank's ceiling, accounting for stamp duty, conveyancing, building and pest, LMI, moving costs, and a buffer for rate rises or life going sideways.
The bank's "you can borrow $750,000" means you'd survive repayments today — not with two kids, a rate rise, and a hot water system replacement at the wrong moment.
Visual: Borrowing capacity vs max purchase price
What the bank will lend
$750,000 (bank's ceiling)
What you should spend
$680,000 (your ceiling)
| Component | Amount | Why it matters |
|---|---|---|
| Max purchase price | $680,000 | The number you actually offer |
| Stamp duty + costs | ~$30,000 | Conveyancing, B&P, rates adjustments, moving |
| Safety buffer | ~$40,000 | Rates rising, life going sideways, hot water replacement |
| Bank's ceiling | $750,000 | What they'll lend, not what you should spend |
A lender saying you can borrow $750K doesn't mean you should buy a $930K house. Your number sits below the bank's number and accounts for the costs they don't show you.