How much should I spend on my first home?

The bank answers a different question

The bank tells you the most you can borrow. I help you decide the most you should spend. They're two different numbers, and most of the stress lives in the gap between them.

A pre-approval only knows your income, your debts and the lender's rules. It doesn't know your parents are coming from India for three months next year. It doesn't know a baby is due, or that one of you wants to go back to study.

Being ready for the loan is not the same as being ready for the buying decision.

What I'd work out before looking at a single home

• What you really spend in a normal month. Not your best month.
• What changes in the next five years. Kids, parents visiting, a stretch on one income.
• The buffer you want left in the bank after settlement, for the things that break.
• The costs on top of the price, like stamp duty, legal fees, inspections and moving.

Once you know the repayment you can carry in your toughest realistic month, the price range follows. That's the number to shop with.

If it comes out lower than your pre-approval, that isn't a failure. That's a plan.

Why this question matters to me

I've spent over 15 years in lending, across two major banks and then broking, with more than $450M in settled lending. The most important conversation was rarely about the loan. It was about whether the home still worked when life changed.

Related questions

• How do I know if I'm ready to buy my first home?
• Should my first home be my dream home?
• How should I plan my first home if my parents will come to stay?

This is general information, not personal advice. Rules change, so check what applies to you now.