Your income plays a large part in determining how expensive of a home you can afford to buy. Most lenders will assess your mortgage application under the assumption that around 30% of your gross income will be used to make loan repayments. They then determine your borrowing power by factoring in any debts, assets, and expenses. You can calculate a rough estimate of your borrowing power by determining:
- Your annual income
- The size of your deposit
- Your average expenses
How Much Do I Need to Earn?
With the property market in Australia being at an all-time high, housing prices are rapidly increasing. However, the average income is not rising to match. In Australia, the average income is between $55,000 and $85,000 a year. When you factor in 30% of your income going towards your loan repayments, a 30-year loan term, an interest rate of around 2.5%, and the full 20% deposit, the following information is revealed:
- To buy a $1 million home, you need an annual salary of around $160,000.
- To buy an $800,000 home, you need an annual salary of around $128,000.
- To buy a $700,000 home, you need an annual salary of around $112,000.
- To buy a $600,000 home, you need an annual salary of around $96,000.
- To buy a $500,000 home, you need an annual salary of around $80.000.
- And to buy a $400,000 home, you need an annual salary of around $64,000.
If you are looking into buying a home but are concerned about a 20% deposit, Mortgage House can find the right low deposit home loan with competitive rates. If you are worried you don’t make enough to afford a home, we will sit down with you to assess your financial situation.
