Does notional rent apply if I am buying a home to live in?

No. If you are buying a property to live in, notional rent is not included, because the mortgage repayment replaces it. The two get swapped out. Notional rent only appears on investment purchases where you will continue living somewhere else.

How much notional rent do banks add?

It differs at every lender. A common figure is around $150 a week, which is roughly $7,800 a year of assessed expense. Some lenders apply a higher figure. A small number apply none at all, and borrowing capacity is materially stronger with those lenders.

Which lenders do not apply notional rent?

There are a couple, and they are few and far between. Which lenders sit where on this changes as policies are updated, so it is checked at the time of your application rather than assumed. It is one of the specific things worth matching a lender on if you are buying an investment while living at home.

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Straight Answers · Notional rent

I live rent free with family. Why does the bank add a rent expense?

Bayley Clarke · Mortgage broker on the road · Last checked 19 August 2026 · 4 min read

The short answer

It's called notional rent. The banks assume you're not going to be living at home with your parents forever, so they build a rent line into the assessment even though you currently pay nothing.

Two things make it worth understanding rather than just resenting. It only applies when you're buying a property you won't live in. And the amount is not standard: most lenders sit around $150 a week, and a small number apply nothing at all.

The 60 second version. The rest of this page is the detail underneath it.

Why the bank charges you for something you don't pay

The logic is more reasonable than it feels when you first see it on your assessment.

A lender is not assessing your life today. It's assessing whether you can service a loan for the next thirty years. And nobody lives in their parents' spare room for thirty years. At some point you move out, and on that day a rent or a mortgage appears in your budget that isn't there now.

So rather than assume the free ride lasts forever, they build in a housing cost. That's notional rent. Not a fee, not a charge, just a line in the affordability calculation that says: eventually, this person pays for somewhere to live.

It only shows up on investment purchases

This is the part people get wrong, and it matters, because it means most first home buyers never encounter this at all.

If you're buying a property to live in, notional rent isn't included. Obviously, because you're about to have a mortgage. The two get swapped out, one for the other. You're moving out of home and into the place you're buying, so the housing cost the bank was worried about is the loan they're already assessing.

Notional rent only appears when you're buying somewhere you won't be living, and you'll be continuing to live at home. Which is a very specific and increasingly common situation: young people staying with family, saving hard, and buying an investment property first rather than a home.

You live at home rent free and you're buying	Notional rent applied?
A home to move into	No. The mortgage replaces it
An investment property, staying at home	Yes. Around $150 a week at most lenders

The number is different at every bank, and that's the opportunity

Here's where it stops being trivia and starts being money.

Notional rent is a policy setting, not a law, so every lender picks its own figure. Some sit around $150 a week, which is roughly $7,800 a year of expense the bank counts against you for money that never leaves your account. Others use a higher number. And there are a couple of lenders that don't apply any notional rent at all.

Your borrowing capacity is obviously going to be a lot stronger with those banks. They are few and far between, and which lenders sit where moves as policies get updated, so it's something to check at the time rather than assume.

But the point stands: if you're living at home and buying an investment, this single policy setting can move your borrowing power further than any conversation about interest rates will. And nobody at a branch is going to raise it with you, because a branch only has one policy to offer.

What this doesn't mean

It isn't a charge. Nobody takes $150 a week off you. It's an assumed expense inside the serviceability calculation, and it affects the size of the loan, not your repayments.
The zero-notional-rent lender isn't automatically the right lender. Rate, fees, policy on your income type and the property itself all still matter. It's one input, not the whole decision.
You can't opt out by promising to stay at home. The assumption is built into the assessment. What you can do is choose a lender whose assumption is smaller.
It's not the only invisible expense. Credit card limits and HECS get counted in ways people don't expect either. Credit cards here, HECS here.

The question worth asking before you pick a bank

If you're living at home and buying an investment property, the question is not "what's your rate." It's "what notional rent do you apply, and is there a lender who applies less."

That's a question a branch can't answer usefully, because the answer is always their own policy. It's the sort of thing that only shows up when someone can see across a panel of lenders at once, which is genuinely most of what my job is.

Living at home and buying an investment?

Give me half an hour and I'll run your numbers across lenders that apply notional rent and lenders that don't, so you can see the actual gap rather than guess at it. If it turns out it barely moves your number, I'll tell you that.

Book a 30 minute call Call 0437 189 939

No application, no credit check, nothing on your file. Just the numbers.

Next question

Does my credit card limit affect my borrowing power?

Same shape of problem. The bank counts something you're not actually spending.