How Much Can a First Home Buyer Borrow in South East Melbourne, What Lenders Actually Check
Your borrowing limit as a first home buyer is not a single number the bank calculates once and hands you. It is the result of several moving parts, and the part most buyers underestimate is how differently lenders read the same income, debts and deposit.
In South East Melbourne, where unit medians in suburbs like Cheltenham sit at $700,000 and Bentleigh units reach $935,000, knowing how lenders actually assess your position changes which suburbs are realistic and which schemes genuinely help.
Our team works with first home buyers across South East Melbourne every week, comparing how lenders read each situation across 60+ lenders. The first home loan structure you choose, and which lender you go through, moves your number more than most buyers realise.
Key takeaways
- Lenders add a 3% buffer on top of the actual rate when assessing borrowing capacity.
- Every approved suburb's house median sits above the $950,000 scheme cap.
- First home buying in South East Melbourne is largely a unit story, not a house story.
Can first home buyers in South East Melbourne borrow enough to actually buy here?
Yes, though your realistic target in South East Melbourne is almost always a unit, not a house. CoreLogic data shows that every approved suburb's house median sits above the $950,000 First Home Guarantee cap, with even the most accessible suburbs, Moorabbin at $1,280,000 and Cheltenham at $1,298,750, well above it. Unit medians tell a different story: 22 of the 28 approved suburbs have a unit median under the cap, with options from $470,000 in Ripponlea up to $935,000 in Bentleigh.
Source: CoreLogic (via YIP, June 2026).
How do lenders actually calculate how much a first home buyer can borrow?
Lenders assess your borrowing capacity by working out what you can repay, not what you earn. APRA requires every lender to add a 3% buffer on top of your actual interest rate when stress-testing the repayments, so even if your loan rate is around 6%, your capacity is assessed at roughly 9%.
On top of that, lenders measure your living expenses against the Household Expenditure Measure benchmark. If your declared expenses fall below the benchmark, the lender substitutes the higher figure. Your credit card limits are counted as though the cards are fully drawn at roughly 3% to 3.8% of the limit each month, whether you carry a balance or not.
Your HECS debt also reduces capacity. It is not the balance that matters to lenders, but the compulsory repayment amount, which is income-tested. On a typical graduate income, that repayment can reduce your borrowing limit meaningfully.
We see a lot of first home buyers who've done the repayment calculator online and feel confident, then come in and find their credit card limit has knocked $60,000 or $70,000 off what they thought they could borrow. Closing or reducing the limit before you apply is often the single most effective thing a buyer can do in the three months before they're ready.
Evelyn Clark · Director, Mortgage & Finance Broker · Chat to Evelyn →
What do lenders check before approving a first home buyer's application?
Eligibility for a first home loan is not complicated, but lenders are looking at several things at once. Meeting the standard criteria is the floor, not the approval.
What lenders verify:
- › Income evidence: two to three recent payslips and a current employment contract for salaried buyers; two years of tax returns for self-employed or ABN borrowers.
- › Genuine savings: most lenders want to see at least five percent of the purchase price held in savings for a minimum of three months, demonstrating a saving pattern rather than a lump-sum gift.
- › Existing debts: personal loans, HECS balances, car finance, and credit card limits all reduce capacity. The credit card limit is assessed at the full limit each month, not the balance you carry.
- › Credit history: a clear credit file with no defaults or recent missed payments. A default stays on the file for five years from the date it was listed, whether it has been paid or not.
- › Citizenship or residency: at least one applicant must be an Australian citizen or permanent resident to access the First Home Owner Grant and the duty exemption.
Source: APRA; State Revenue Office Victoria.
What government schemes can first home buyers in South East Melbourne use?
Several schemes reduce how much deposit you need or cut your upfront costs. Eligibility runs on your income, the property price and whether it is a new or established home, not on your occupation.
The options worth weighing:
- › First Home Guarantee (5% Deposit Scheme): 5% deposit · no LMI · no income test · $950,000 price cap in South East Melbourne
- › Family Home Guarantee: single parents only · 2% deposit · no LMI · does not require first home buyer status · $950,000 cap
- › First Home Owner Grant:$10,000 · new homes only · $750,000 price cap · must live in the home for 12 months
- › First home buyer duty exemption: full exemption at $600,000 or under · sliding concession to $750,000 · applies to new and established homes
- › Help to Buy (federal shared equity): 2% deposit · government takes up to 30% equity in existing homes · income cap $103,000 single / $165,000 joint · $950,000 cap
The Victorian Homebuyer Fund is closed to new participants. Help to Buy is the only shared-equity pathway currently available to South East Melbourne buyers.
Source: Housing Australia; State Revenue Office Victoria.
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How much deposit do first home buyers actually need in South East Melbourne?
Your deposit requirement depends on which lender you use, whether you access a guarantee scheme, and whether you want to avoid Lenders Mortgage Insurance.
The standard path without a scheme
Without a government guarantee, most lenders require a 20% deposit to avoid LMI. On a $700,000 unit that is $140,000. If you go in with a smaller deposit, LMI is added to the loan. On a $700,000 purchase with a 5% deposit, LMI adds approximately $21,000; at 10% down, it is approximately $14,000.
The scheme path
The First Home Guarantee lets eligible buyers purchase with a 5% deposit and no LMI, with the government guaranteeing the gap. The $950,000 price cap covers units across most of the approved suburbs, including Cheltenham at a $700,000 unit median, Murrumbeena at $636,250 and Bentleigh at $935,000. Every house median in the approved set sits above the cap.
If your deposit is available but tight, the First Home Super Saver Scheme lets you withdraw voluntary super contributions, up to $50,000 in total and $15,000 per year, to put toward a deposit. That is a meaningful supplement for buyers who have been salary-sacrificing into super.
Source: Housing Australia; CoreLogic (via YIP, June 2026).
When does pushing your borrowing limit not make sense?
Borrowing at the top of your capacity can work, but there are situations where it is the wrong move. If your income is variable or you're in the first year of a new job, a lender may approve you at your maximum, but your buffer against a rate rise or an unexpected expense is thin. A repayment amount that is technically serviceable today can become genuinely stressful after a rate move of even half a percent.
It is also worth thinking about what you are buying. A unit at the very top of your limit in a suburb you stretched to reach is a different financial position from a unit with some room beneath the limit in a suburb that suits your life. The approved suburbs in South East Melbourne span a wide range, from entry-level units in Oakleigh at $580,000 to premium stock in Malvern at $785,000. Buying to your ceiling closes off the flexibility to renovate, carry a gap in income or accumulate equity before the next move.
If we see a buyer whose borrowing limit is right at the price they need, we would usually look hard at whether a six-month wait to reduce a credit card limit or build a slightly larger deposit would open a better lender at a better rate. That conversation is often the more valuable one.
Where a buyer's limit lands right at the purchase price they've set their heart on, we'll usually look at two or three lenders with different living-expense benchmarks before committing. A benchmark difference between lenders can move the approved amount by $40,000 or $50,000 on the same income, which is often the gap between a property that works and one that doesn't.
Evelyn Clark · Director, Mortgage & Finance Broker · Chat to Evelyn →
How do mortgage brokers help first home buyers borrow more in South East Melbourne?
The lender choice decides the outcome more than the rate does. Three policy differences move the borrowing number for first home buyers, and they're not published side by side anywhere.
- › Living expense benchmarks: different lenders apply different HEM figures based on household size and income band. The same buyer can have a meaningfully different limit depending on which lender's benchmark applies.
- › HECS treatment: some lenders are more aggressive in how they model the compulsory repayment, especially on higher incomes. Switching lenders on the same income can change borrowing capacity by a material amount.
- › Genuine savings definition: some lenders count a parental gift as part of genuine savings; others require the savings to be held in the buyer's own account. That distinction changes which buyers qualify at which deposit levels.
Comparing across a panel of 60+ lenders finds these differences in a single conversation rather than across three separate applications, each leaving an enquiry on your credit file.
What goes wrong when first home buyers apply in South East Melbourne?
The common hurdles:
- › Too many credit enquiries: applying to multiple lenders directly leaves an enquiry each time. A cluster of enquiries in a short period signals desperation to the next lender who sees the file.
- › Buy-now-pay-later accounts: BNPL commitments appear on bank statements and are treated as regular commitments by most lenders, reducing serviceable income even where the balance is small.
- › Rentvesting first: buying an investment property before your own home costs you the First Home Owner Grant and First Home Guarantee eligibility permanently. Once you've held an investment, you are no longer a first home buyer for these purposes.
- › Wrong lender for the property type: some lenders restrict LVR in high-density postcodes. A unit in a well-supplied inner-suburb postcode can attract a different maximum LVR from one lender to another, which affects how much deposit you actually need.
Frequently Asked Questions
What is the maximum a first home buyer can borrow in South East Melbourne?
There is no single maximum; it depends on your income, debts, deposit and the lender's own benchmark. The practical ceiling for most scheme-eligible buyers is $950,000, which is the First Home Guarantee price cap for every approved postcode in South East Melbourne.
Does my HECS debt stop me from getting a first home loan?
HECS debt does not stop you from getting a loan, but it reduces how much you can borrow. Lenders count the compulsory annual repayment as an ongoing commitment, which lowers your serviceable income, and different lenders model it differently.
Can a first home buyer in South East Melbourne use the 5% Deposit Scheme on a house?
Not practically in South East Melbourne. The First Home Guarantee cap is $950,000 and every house median in the approved suburbs sits above it. The scheme works well for unit purchases, where 22 of 28 suburbs have a median under the cap.
Should first home buyers in South East Melbourne use the First Home Guarantee or Help to Buy?
The First Home Guarantee requires a 5% deposit and leaves you with full ownership; Help to Buy requires 2% but the government holds equity in the property. The better choice depends on your deposit position and your income, which is worth comparing before you apply.
How does the serviceability buffer affect how much a first home buyer can borrow?
APRA requires every lender to add a 3% buffer on top of the loan's actual rate when testing repayments. If the rate is around 6%, your application is stress-tested at roughly 9%, which meaningfully reduces the loan size you can qualify for.
Is a mortgage broker better than going directly to a bank as a first home buyer?
A mortgage broker, every time. A bank assesses you against its own policy; a broker compares how your income, debts and deposit are read across a panel of lenders, which often produces a higher approval limit or a better structure for the same application.
Your Next Steps
Knowing how much you can borrow as a first home buyer in South East Melbourne comes down to how your specific income, debts and deposit are read by the right lender. The difference between lenders on the same application is often the difference between reaching the suburb you want and settling for one you don't.
Ready to find out which lenders will work best for your first home purchase? Contact the EverLend team or call 03 7036 3356. We'll canvas our 60+ lender panel and find the most suitable options for your circumstances.
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External Resources
EverLend · South East Melbourne · Ever Lend Pty Ltd (ACN 625 080 515), authorised under Australian Credit Licence 517192 · General information only - this article does not constitute financial advice. Please consider your own circumstances and seek professional advice before making any financial decisions.
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