Weekly rent often is 500-600..
Don’t know about you guys but thats over 40% of my income weekly. As would it be from many many Australians.
Sad times :,(
Not necessarily depending on where you live. 250k let’s call that 20k per month. That’s 7k per month housing in round figures. That would cover repayments on approx 1.5-1.7m mortgage. That’s barely a house in Sydney for example
That’s fair but not really the point I’m trying to make. If they did have that 1.5-1.7m mortgage they would be living comfortably (until interest rates rise a few % at least 😬)
>Mortgage stress has no one accepted definition but is often described as paying more than 30 per cent of household income in mortgage repayments and associated housing costs.
>Unlike the previous two categories, housing affordability stress (HAS) does have a recognised definition: when households in the bottom 40 per cent of the income distribution pay more than 30 per cent of their gross income on mortgage or rent payments.
>The 30:40 indicator identifies households as being in housing affordability stress when the household has an income level in the bottom 40 per cent of Australia's income distribution and is paying more than 30 per cent of its income in housing costs. The underlying assumption is that those on higher incomes who pay more than 30 percent of their income for housing do so as a choice and that such housing costs have little or no impact on the household's ability to buy life's necessities (such as food, health care, education etc.).
https://www.ahuri.edu.au/research/brief/mortgage-stress-rental-stress-housing-affordability-stress-whats-difference
https://www.ahuri.edu.au/research/brief/understanding-3040-indicator-housing-affordability-stress
What about at higher income levels, someone on $100k would find that hard but if you are making upwards of $300k - $400k your free cash flow over living expenses gets much better.
Obviously we spend more as we make more.
You would be surprised. I knew lots of them growing up in Vaucluse. Of course some are outrageously wealthy but plenty of the top 1% are on the debt treadmill- just a zero or two on the end of all the numbers, such as house value and monthly mortgage payment.
Yeh , but trust me it’s 💯 true. It’s very sad but they are not alone in stress levels. Other families there take the vacations, def get the Mercedes ( as these guys did - 1 for each the husband and wife ofc). These guys at least were sensible to not take those holidays. Can you imagine the cost for a fam of 5! That would be massive. I moved out of the area as I couldn’t see putting my fam under more debt. I couldn’t handle that kind of stress back then or now.
Hard yards (relative) for a few years.
Then the kids are out of school and you have almost paid off a house worth a fortune.
A massive mortgage usually means a big house worth a lot. In the last 30 years with massive growth in house prices you are probably making your money back (on paper) with the increase in property value.
It's a risky strategy but one that has worked out well for a lot of people. And you get the benefits of a nice home in a great location.
Yeah it seems a lot of these families have a man on big bucks but the female partner only working part time or not at all. If one partner is getting $450 and the other not working at all you’re not so far ahead
Really puts the comparison of country/city into perspective. You could earn half of a city slicker, but be better off. The IP we got up the coast from Syd was just shy of 500k, but looks nicer than the million-dollar place we rent in Syd. I'm sure I could work where the IP is, and earn close to what I earn now. Especially with a WFH job. Very tempting.
> the coast from Syd was just shy of 500k
It is probably a million-dollar place now. Not sure if you checked prices recently outside of Syd close to coast but they are ridiculous.
We're not exactly country country but sort of outskirts regional. Earn about average income but was able to buy a new house at 2.8X household income. Borrowed about 2.35X and after raises and a year of repaying, owe about 2.1X. Pay about 9% of pre-tax income. Quite a nice building on a small plot of land for the region's.
I think about moving to the city sometimes for the food a maybe a more glamourous jobs that I see some of my school mates doing. But then when I holiday in the city, I remember why I moved out here in the first place (I only have a 5-10 minute drive to work).
I have a mortgage of $400,000 and I am the only income at $65,000
Luckily purchased in October and locked a fixed rate at 1.9% for 5 years. I think if I hadn’t done that I would have over extended myself
Congrats to you mate ! Always an exciting time to buy a house
I’m very lucky to be honest, thankfully should be pretty stress free for the next 4.5 years or so
Well there is a huuuuge housing crisis in Tasmania at the moment. So demand for houses are through the roof, even rentals are crazy expensive.
If I were to rent out my house I would be making $300 profit a week after paying the loan and insurance.
That tied into a lot of ‘mainlanders’ moving down to Tassie as they can work via distance. So the influx of more people with higher wages than the usual person in Tassie is driving he price up.
Honestly Tassie is the best place to live, I am 5 minutes from the Hobart city, 4 minute walk to work, 20 minutes to a beach/surf beach. Plus you are getting awesome houses for similar prices to what Melbourne and Sydney were like 10 years ago or something.
Look into houses around Hobart and you’ll see what I’m talking about
Second this, Hobart is the absolute best for lifestyle. Especially if you're from a city and struggle with the regional vibe. Houses are incredible in and around the city too.
"dont really care about the price" is the quickest way to house poorness https://www.investopedia.com/terms/h/housepoor.asp#:\~:text=%22House%20poor%22%20is%20a%20term,taxes%2C%20maintenance%2C%20and%20utilities.
Sure but also recognise house poor is probably for ~10 years, followed by 'your lucky to have a wonderful home' for the rest of your life.
Obviously endless edge cases like a getting a big mortgage at 65 doesn't seem sensible but generally putting more into your house at an early/mid stage of life is likely to benefit more people longer term than not.
Exactly, I'm paying 33,600 yr in rent, already paid $104k for the pleasure of living in someone else's house, but that will soon end. We have to move city to get a mortgage, but it's worth it for a small mortgage under $300k
I have $160k - ish - deposit, either through the new Govt Help to Buy scheme ($150k or 30% of a $500,000 house) or from the bank of mummy. Looking at moving to central Qld Yeppoon area, 20mins south of Yeppoon in a place called Zilzie you can buy for around $450k.
As someone who has signed a contract around that general area (essentially northern Rockhampton suburb but is like 20 mins to Yeppoon) I can confirm both the FHLDS scheme and house prices here are both pretty good. Zilzie is sort of far if you are working in Rockhampton but not bad for Yeppoon. You are paying a bit higher just for being at the beach as you'd know but for 250-450k you can still find nice places around here.
A colleague just convinced himself to buy too. He's paying $450 per week rent but him and his partner don't want kids so are looking at nice Queenslander homes for sub 300k. Even with a 300k loan his repayments would be less than rent and likely cover rates.
its my forever home - not concerned about the price of the house after I buy it until maybe age 60 when i would look to retire and downsize (thats over 25 years away)
"One estimate of how much to spend on a home is 2.5 times your total gross annual salary", most new families who recently purchased in Australia are house poor.
That doesn't factor in interest rates so it's a terrible rule.
Buying a house worth 2.5 times gross annual salary when interest rates are 17 percent is not the same as when interest rates are 3 percent.
I'm willing to be that when someone came up with that rule, mortgage rates were probably around 7 percent.
Good luck following that rule in 2022.
Oh, so close. We're at 2.92. We have a small loan though and bought in a much cheaper area. From what I can tell, most people borrow way more than this.
I'm in Melbourne and the area I want to live in and have our kids grow up in will be a house of approx. $2m+ with about $1.2m mortgage. Could go up to $1.5m mortgage/$2.3m house if needed..
Always thought you should buy to the absolute max of what you can afford. Let the rest bend around that. Might be a pinch for a couple of years but why not?
Like is the only risk losing an income? (obv interest rates and cost of living etc.) other than pinching the dollar when needed..i cant see why not?
not a financial expert, but I'd suggest it's probably a bad idea to borrow 1.2 million dollars for anything unless you're making extremely good money already, and even then it's a monster debt, how expensive is the house if you'd need to *borrow* 1.2 million?
Consider this mortgage. I owe 900 on a house worth around 2.2/2.3, household income 210. We struggle but have 3 kids. Your situation may change a lot where that loan is unfeasible.
It seems like 250 is high, but well there are some really high income earners out there. That’s a lot to owe.
$200k household income, grew up live on the north side of Sydney, 15 mins from the coast. Cant buy a 3br+ house for under about $2.2m here. Can't foresee ever having a mortgage around where I grew up, where my job is, and the majority of family and friends. Rent til dead, earn 3x as much, or move out of Sydney is the options I see.
Similar situation with houshold incomes and price of area i grew up in but in inner eastern melbourne suburbs. Looking at moving north of where the family etc all are about 20-30mins. Might be able to afford something around the 1-1.1 mark which is not our max technically but the max we would comfortably spend. It feels like a big downgrade in ways but its the price to pay to own something of our own and its the reality for many people of our generation have to just accept. Can imagine sydney would be even worse for first home buyers
Probably not what you want to hear, but at 200k houshold income on the lower north shore I'd say you would be at or below median family/household income. You are also below median age, which is relevant because many others in your area are more than likely to have accumulated more wealth with time. Appreciate you are not asking for advice...if you work towards advancing your career and earnings then the 3br house could be attainable in a few years time. You're still young.
Agreed, I'm working hard to grow professionally and increase that household income, so that we could consider buying where our life is. Feels like people get spiteful in this subreddit the moment they see you're from the northern beaches. I'm not looking for a mansion, I'd be happy for a 70 year old weatherboard fixer-upper.
For sure, I could move west, but when that means I'm over an hour away from my job, friends & family, and still paying the entirety of the takehome pay from my 120K job for a mortgage, I wonder what for. At that point I'd rather move out of Sydney. I'm not asking the world either. At $2.2m, you get a 40 year old 3 or 4 bed house on 700m2 with no pool etc. It's hardly luxury. At risk of sounding entitled, as a 33 year old university educated engineer, you don't think a small freestanding home for your wife and kids, 15 minutes from the beach should be an excessive ask.
> At risk of sounding entitled, as a 33 year old university educated engineer, you don’t think a small freestanding home for your wife and kids, 15 minutes from the beach should be an excessive ask.
not having a go at you but how do you expect this to work? There’s only so many spots 15 mins from the beach. The only way for this to scale is for australians to embrace medium to high density living and build more quality apartments.
>At risk of sounding entitled, as a 33 year old university educated engineer, you don't think a small freestanding home for your wife and kids, 15 minutes from the beach should be an excessive ask.
in this day and age I could never envision that being possible in syd. Good job, luxury living etc. Not unless you are looking at high density living. just too many people in syd and not enough land near the coast to be able to give everyone a 3 bedroom house etc for a reasonable amount.
Agreed, at this rate I expect I'll move out of Sydney in due time. Eventually though, Sydney may end up an aged population only, and the retirees will wonder where all the young people are, to fulfill the low-income critical jobs, like nurses, teachers, aged carers, retail workers. It'll be a ghost town
yeah maybe, they keep harping on about how melbourne will overtake sydney one day and I know alot of people have moved north to Qld.
Hopefully more remote/work from home jobs take up and people are more willing to live and work outside of the main city hubs...I wouldn't mind living out west if it didn't feel like such a rip off for the privilege of living out here. the prices here are stupid af.
You live in one of the most expensive cities in the world, you absolutely could, just likely not in Sydney.
I grew up around you and will be 41 this year. Would love to own where I was raised, no chance. We had a 1 bedroom appt for 11 years ans paid it off by the time we moved.
Now down to 1 income with a child, when income goes back to 1.5x (part time), will want to move out of our inner west semi to something further out and put up with the added travel.
West isn't cheap, no where nice is cheap in Syd.
Do your homework and consider areas you wrote off, you might be surprised what you find if you are willing to really re-look at your priorities, otherwise you're going to be grinding for a very meagre existence in a nice secluded area.
I used to joke that the hbr bridge kept the ruffians out of the north, now going over the bridge feels like going back in time.
People act like it’s outrageous to ask for that and “Sydney’s an expensive city get over it” but simple fact is it doesn’t need to be and we’ve prioritised investment over ability to buy and live in a home and it’s pretty sad. All we want is what the generation before us had….so no it isn’t too much to ask.
Similar situation here with >$200k household income and just feels like there isn’t an avenue without leaving Sydney
Buy where you want to move to.
https://www.realestate.com.au/property-house-qld-birkdale-139642859?
https://www.realestate.com.au/property-house-qld-wynnum-139408123?
https://www.realestate.com.au/property-house-qld-broadbeach-139280999?
https://www.realestate.com.au/property-house-qld-burleigh+heads-139289823?
This day and age, a 3br freestanding home is unrealistic, but it wasn't 30-40 years ago. What's the justification? I drive past 5 year old shacks needing renovations and dream of owning them.
What about a townhouse? We recently bought a 4 bedroom 2 storey townhouse on about 200sqm of land and it's perfect for a family.
Land is so expensive so if you can get a property on a smaller parcel of land it's more achievable.
We just moved out of a 40 year old 2br townhouse in a high density suburb 10 minutes from the coast, and they were all selling for $1.75M. Would have loved to own one. Decided to move slightly further west to get some space.
I had a good laugh after seeing the other replies to your posts so wanted to chime in and say you aren't crazy.
You are spot on. Buying a free standing house in a good part of Sydney is simply unaffordable.
I grew up in the country and we had a big house out there. When I was nearly an adult my folks moved the fam to Sydney and swapped our big house for a small townhouse in Western Sydney. I hated it because it felt like a downgrade but they decided it was the best choice at the time for various reasons.
15 years later I currently rent an apartment in a decent part of Sydney that I could only ever buy a small apartment in. I moved here because I can't handle a 1 hour commute into the city to work... it's horrible, dunno how people do it.
The problem is population. Look at a chart of Sydney's population over time. 30 years ago there were 1 million less people vying for that same bit of land you want. It's only gonna get worse over time, with Sydney's population projected to increase by a few more million over the coming decades. Changing policies like negative gearing or introducing whatever first home buyer help scheme won't resolve this simple fact of population growth.
I'm keen to get the hell out of Sydney as soon as possible, it's just a matter of working out the logistics of work for both my partner and myself. I don't know where to go or how to go about it. Central Coast? Maybe. Newcastle? Wollongong? Or a different state entirely? There's many options we are considering, and each has its own pros and cons.
Fair point, that's where I recognise my 2 very active kids need space, and that's the motive to move out of sydney, to give them that space without financially straining us.
I'm not a fan of income multiple figures, it completely ignores interest rates which is as we are seeing right now a critical piece of the puzzle, 4 x income when mortgage rates are 17% is a world apart from rates of 4 or 5% at 4 x income.
% of income going to repayments makes far more sense to me and paints a better picture of how manageable a mortgage actually is for someone to have, but even that is not a full picture for some locations, a barista living in inner sydney will be paying a huge % of their income just to rent so it would be reasonable to assume they need to pay a higher % of income for a mortgage too, but a general rule of thumb is around 30% of your take home for shelter costs (rent or mortgage) is considered comfortable.
having said all that, your situation looks frankly great, your annual repayments are something like $33k and your household income is 215k a very low percentage, I don't even need to work out your take-home amount as I can tell its still a very low percentage.
A big mortgage for you might be annual repayments of 80k+ which is a loan approaching 1.5m in size...
I reckon any mortgage these days of 1m+ is "big"
The problem is, once interest rate flip, the repayment changes drastically. In that sense, income multiple is a better predictor of being able to afford the debt until the end imo
depends on what you call drastically, an increase on a 570k loan from 2% to 5% increases your repayments from $25,284/yr to $36,720/yr which is significant, but compared to 18% of the early 90's the same loan would have repayments of $103,080 - now thats drastic
Income multiples is nice to compare a crude form across decades, but as I say it completely ignores interest rates which is why I am not a fan, you need to have interest rates in your factor as that is better for comparing the current or recent situation, people in the early 90's would kill to have mortgage rates of sub 5% like we have now, and we would kill to have income multiples that they had back then.. what we can't have is the best of both worlds, low income multiples combined with low interest rates..
Multiples of income is useful in understanding price inflation. Tbh I prefer it only because it's useful in calculating median interest charges and wotif scenarios.
Cost of living issues need to include interest charge simply because stress testors need it basically.
That's why markets stuck to 1/3rd.. because they wanted that breathing room for interest rate rises. What Aus seems to have forgotten is around 6% is normal and rates do rise.
Don't disagree with you tbh, a percentage base now knowing that rates will eventually normalise makes more sense rather than a third at record lows.
Big mortage is when your debt is 5x or more of your annual income pre-tax.
From 1960 to 1990, it was 1x income: [https://www.macrobusiness.com.au/2013/02/the-history-of-australian-property-values/](https://www.macrobusiness.com.au/2013/02/the-history-of-australian-property-values/), went to 5x on 2010, [https://www.abc.net.au/news/2017-06-03/house-price-to-income-ratio/8586524](https://www.abc.net.au/news/2017-06-03/house-price-to-income-ratio/8586524) and now I think Sydney/Melb is at 8x? (no source)
Another source: book "The Millionaire Next Door (1996)", the majority of people with 1M network paid 3-5x their annual income on their home, don't remember the exact %
For our household, we agree with u/crappy-pete as a multiple of income of more than 5x.
APRA mentions concerns at 6x household income ([https://www.apra.gov.au/news-and-publications/apra-increases-banks%E2%80%99-loan-serviceability-expectations-to-counter-rising](https://www.apra.gov.au/news-and-publications/apra-increases-banks%E2%80%99-loan-serviceability-expectations-to-counter-rising)) as an increasing proportion of lending (article dates back to October). These mortgages are classed as "high" debt to income ratios.
I could not find a reference (quick Google search only) but AFAIK, banks used to loan no more than 3 to 4x household income. This is the range we kept within for our mortgage last year.
From your figures, I'd say you're good based on that - you're less than 4x household income. If you wanted to work out your ability to service your mortgage in an era of increasing rates, look at your current household budget and plug in your figures in a mortgage calculator to see where repayments start to get difficult for you (based on your current spending habits).
In terms of $ figures - I don't have anything to say other than someone with a $10M household income is likely to be well able to service repayments on a multi-million dollar mortgage.
TL;DR - it's better to use multiples of income rather than dollar figures.
I'll tack on, a big mortgage to me is one where you're too scared to change your job in fear of instability. If you can't take positive career risks, a mortgage is too big for comfort.
I disagree or maybe I'll amend to I'll add, what about those stuck in a dead end job but have 3-4 mouths to feed, changing nappies, heaps of responsibility, relative mortgage but they have too much responsibility to take positive career risks? it's not the mortgage itself that's doing it.
Thats fear for a different reason. Its fair enough to want stability in those hectic years. Not really related to morrgage size though, probably someone renting in that situation would also desire stability. Having little kids is always a hard time but short lived luckily.
General rule for me would be anything over 5-6 debt to income. But that’s just a general rule and a sliding scale based on your income level and expenses.
I'm a Mortgage Broker.
A big mortgage is when your mortgage limit is a multiple of 7 x your total gross taxable income (pre tax income).
This is known as a Debt to Income Ratio or DTI. Example, $100K base pre tax on a $700K mortgage is a 7 x DTI.
I find the city v non city location to live a very odd one, why to people hold on to city living at all costs? My industry like many are struggling to fill positions in non capital cities, so wages are higher, overtime opportunities are higher & housing is half. I’d much prefer to live away from traffic, own nice things, take weekends away & take a month long holiday overseas every year all while paying off a mortgage & putting saving aside. Why are people chasing million dollar houses in a capital city & struggling & having a poor life balance all to say they live in a million $ house…..there is more to life. But this is just my 2c
This was a reply to someone saying:
"400k Mortgage. 80k income. $4400 Monthly take home, Repayments are $1700~ Im doing okay I think"
Reply seems unnecessarily mean.... they were actually adding to the conversation.
Mine is $220K with an $80K income. I look at my outgoings for the property compared with rents for the same type of dwelling (2 bed apartment, living alone in the same area).
I got my mortgage on $53K ($250K) and that was teetering on uncomfortable.
$120k family income (pretax), $300k mortgage.
Pretty low I think. Once I'm back at work we might buy a different house, but for now we're very comfortably living within our means.
Our borrowing cap is about $500k so that's what I'd consider big. It just depends on each person's circumstances.
Ours is 5.63 x income including rental income . Spread across 1 x PPOR and 2 x IP’s
Paying principal and interest on all 3 of them. Which isn’t ideal as would like to pay interest only on the IPs but unable to refinance because wife is taking some time off work.
Probably not, but depends on your situation. If you are DINKs with very good career prospects, and you are good at sticking with a tight budget for at least 5 years (and not increase your spending or have kids) - then it’s potentially do-able.
Glad my parents were poor and very realistic , if you want ocean views and a nice neighbourhood, go on holidays . Buy with 30% of your income as a loan repayment , live where you can afford not where you want . You could choose to buy a place to rent out and live where you want , just in case it goes belly up and you need housing , but that’s a different option.
Yeah the benefits of having to work for it all pay off in the long run.
Same boat here, started with nothing, built our first place is 2017 in a less desirable area and it was tiny, like the smallest 4x2 you could build. Sold it in 2021 for a nice little profit. Rolled those funds over into our new place, 3x the size, 1km from the beach. Was in QLD moved to Perth so that helped a bit, new build again almost finished, going quick just had to wait a while for land to title, got in just before land and build prices sky rocketed, same house is now 70k more to build and land prices have gone up 10%.
120k solo income as wife is looking after baby, spent 550, owe 350, valued at 650, laughing.
I bought a 3 bedder house on 650sqm, 30 minutes from Brisbane CBD last year and with 20% down, my mortgage started at $165K. Payments are about $150 per week.
that's amazing, did you have a large deposit, as I can't imagine many 3 bedders within 30mins of Brisbane being less than 450-500k+ now (most places much more)
The price of the house was $210,000 and it was possibly the cheapest house in Southeast Queensland, in the worst neighbourhood. I used to live in LA though - and have found that the worst neighbourhood in Australia is safer than the best neighbourhood in Los Angeles.
The house was in terrible condition and I spent about $20K getting it liveable and installing security cameras. Now it's quite comfortable- and I might be here until I die.
I guess my point is, there's still cheap real estate around if you are willing to buy a shit hole and/or live in a shit hole neighbourhood. Most people aren't ...
Edit: [For example ...](https://www.realestate.com.au/buy/in-goodna,+qld+4300/list-1?activeSort=price-asc)
Exactly. Buy a shit box, fix it up over time ... eventually you have something that's not half bad. It's the Australian way.
Feels like everybody wants to buy their first home on Bondi Beach.
a big mortgage dependant on the individual and their circumstances if your house hold earns 500k a year a 1m dollar home loan isnt that bad if your house hold earns 60k pa a 500k home loan is huge....
probably as a rough rule anything loan that is more then 5 or 6 x your house hold income.
Every time I read about DTI I cringe. Completely ignores interest rates, it’s like your parents complaining about their 15% interest rate on a mortgage of $100k.
I would consider a big mortgage to be one that you couldn’t easily deal with an increase of interest rates to 5%. I’d argue if that would require changes to your lifestyle to accommodate you may be too leveraged.
I have always gone with 33% of my ‘take home’ pay for housing including rates and insurance. So on 200k single income a breezy mortgage would be about 3700/month. 200k with two earners would be around 4150/month because you get a tax benefit for your household if both people work. This will leave you with 66% of your take home pay left over for food, utilities, travel, and savings and you shouldn’t feel much stress with each mortgage payment.
Mine is $270k on a household income of $230k-$280K (depending on number of consultancies done in the year). I would consider ‘big’ anything that’s 4 x yearly income, but we are very risk adverse
Household income $270k p/a, mortgage approx $800k. Still live very comfortable but still think borrowing any more than that can be a bit of a debt trap.
Great idea, house prices would go up further while hollowing out the tax base the government has even less money to spend on things that have made our society half reasonable.
We make $265k + bonuses (avg $55k last 3 years) and are about to up our mortgage from $950k to $1.25m for an extension. House will be worth circa $1.9m-2.1m after depending on the market (bank just valued at $1.65 pre-extension). We bought last year for $1.07m
Worth it for us, it should pay off unless something drastic happens. But to me it’s a big mortgage and risk right now.
It really depends on your earnings. If your mortgage is 30%+ your earnings, I'd say that is a big mortgage. I've always only borrowed around 15-25% of my total income. Bit of a safety net as if I ever get in a position I can always afford repayments.
I know mathematically is 5\* income or whatever but I am not sure where people are finding properties than are less than 5x income - it's sort of ignoring the current real estate situation. I bought an apartment (which is hardly a full house) and even after saving 160K for deposit and closing costs I still had to take out a 540K loan. As a single person, it's less than 40% of my salary but it's close to it. I am not sure what options I had.
Anything with a loan to value ration greater than 80%
Anything where minimum repayments are > 40% of income.
I was at one stage in $1,500,000 in debt, but that was not big. It was against $2.8m in property and rent from one investment property covered most repayments, and I was paying down a huge amount more than I had to each month. I did not consider this a big mortgage.
Crazy way to look at it lol.
Assuming an interest rate of 2.65%. The mortgage payment required to tackle a loan in 10 years vs 30 is 2.35x as big.
E.g. $1m mortgage, 2.65%, 30 years. Monthly payment = $4,030
$1m morgage, 2.65%, 10 years. Monthly payment = $9,485
Unfortunately, in this (Relatively) low rate environment, its ALOT harder to pay a mortgage off quicker, ironically. Because as rates increase, the disparity between 30 and 10 year mortgage payments actually decreases. At 5% interest, the 10 year:30 year rate payment ratio is 1.98
Perhaps 10-20 years ago, a DINK could crack on and get their small mortgage done in 10 years while rates slowly lowered, but it's pretty hard to do anymore.
I’m pretty much in the same boat as you mate exactly lol 200k combined income 590k mortgage and have an investment property. PPOR is in Sydney market value around 1.1m and IP in Hampton Vic worth 800k+ with 520k owing.
Big mortgage is the one where more than 40% of your weekly/monthly salary goes into mortgage payment.
Weekly rent often is 500-600.. Don’t know about you guys but thats over 40% of my income weekly. As would it be from many many Australians. Sad times :,(
Simply exit the financial system
Guaranteed fix to all money related problems.
After or before tax?
Sounds like he’s talking about the banking definition of mortgage stress - which is 40% of household pre-tax income.
Gee not a lot of breathing room there. Completely appreciate why that would be distressed.
Holy shit, that's well beyond most people's capabilities
Mortgage stress is defined as paying 30% of your before tax income on home loan payments
If you’re on a high income (say $250k+ combined which is pretty common for professionals) you’ll live an extremely comfortable life at 30% repayments.
Not necessarily depending on where you live. 250k let’s call that 20k per month. That’s 7k per month housing in round figures. That would cover repayments on approx 1.5-1.7m mortgage. That’s barely a house in Sydney for example
That’s fair but not really the point I’m trying to make. If they did have that 1.5-1.7m mortgage they would be living comfortably (until interest rates rise a few % at least 😬)
>Mortgage stress has no one accepted definition but is often described as paying more than 30 per cent of household income in mortgage repayments and associated housing costs. >Unlike the previous two categories, housing affordability stress (HAS) does have a recognised definition: when households in the bottom 40 per cent of the income distribution pay more than 30 per cent of their gross income on mortgage or rent payments. >The 30:40 indicator identifies households as being in housing affordability stress when the household has an income level in the bottom 40 per cent of Australia's income distribution and is paying more than 30 per cent of its income in housing costs. The underlying assumption is that those on higher incomes who pay more than 30 percent of their income for housing do so as a choice and that such housing costs have little or no impact on the household's ability to buy life's necessities (such as food, health care, education etc.). https://www.ahuri.edu.au/research/brief/mortgage-stress-rental-stress-housing-affordability-stress-whats-difference https://www.ahuri.edu.au/research/brief/understanding-3040-indicator-housing-affordability-stress
Also, salary or income?
Discretionary or total
Legal or illegal?
Fiat or gold backed?
Real or Ausfinance income?
Potato or pota(h)to?
Let us or lettuce?
Castle or carsle?
Tomato or tomahto?
Bill Paxton or Bill Pullman?
Into or onto?
Sounds like he’s talking about the banking definition of mortgage stress - which is 40% of household pre-tax income.
On a combined income ?
yes. 40% of the household income.
I don’t agree with that percentage, Maybe 10-15 years ago.
I wasn't meaning to endorse the figure, was merely clarifying the og comment for the above commenter :)
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It really depends on income and number of dependents. A flat percentage doesn't usually account for base living costs.
What about at higher income levels, someone on $100k would find that hard but if you are making upwards of $300k - $400k your free cash flow over living expenses gets much better. Obviously we spend more as we make more.
Yeah not many top 1% of earners in the country are probably stressing about what's considered a big mortgage.
You would be surprised. I knew lots of them growing up in Vaucluse. Of course some are outrageously wealthy but plenty of the top 1% are on the debt treadmill- just a zero or two on the end of all the numbers, such as house value and monthly mortgage payment.
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That kind of income and no overseas holidays, that is just bizarre.
Yeh , but trust me it’s 💯 true. It’s very sad but they are not alone in stress levels. Other families there take the vacations, def get the Mercedes ( as these guys did - 1 for each the husband and wife ofc). These guys at least were sensible to not take those holidays. Can you imagine the cost for a fam of 5! That would be massive. I moved out of the area as I couldn’t see putting my fam under more debt. I couldn’t handle that kind of stress back then or now.
Hard yards (relative) for a few years. Then the kids are out of school and you have almost paid off a house worth a fortune. A massive mortgage usually means a big house worth a lot. In the last 30 years with massive growth in house prices you are probably making your money back (on paper) with the increase in property value. It's a risky strategy but one that has worked out well for a lot of people. And you get the benefits of a nice home in a great location.
Yeah it seems a lot of these families have a man on big bucks but the female partner only working part time or not at all. If one partner is getting $450 and the other not working at all you’re not so far ahead
I like Mosman and I like spaghetti, sign me up
I’m in the top 1 percent. Not stressing about the mortgage but cost of living is a concern.
Still less than rent
We are down for a 220k loan with household income of 120-130k, repayments are $220pw. We are country bumpkins...
Really puts the comparison of country/city into perspective. You could earn half of a city slicker, but be better off. The IP we got up the coast from Syd was just shy of 500k, but looks nicer than the million-dollar place we rent in Syd. I'm sure I could work where the IP is, and earn close to what I earn now. Especially with a WFH job. Very tempting.
> the coast from Syd was just shy of 500k It is probably a million-dollar place now. Not sure if you checked prices recently outside of Syd close to coast but they are ridiculous.
We're not exactly country country but sort of outskirts regional. Earn about average income but was able to buy a new house at 2.8X household income. Borrowed about 2.35X and after raises and a year of repaying, owe about 2.1X. Pay about 9% of pre-tax income. Quite a nice building on a small plot of land for the region's. I think about moving to the city sometimes for the food a maybe a more glamourous jobs that I see some of my school mates doing. But then when I holiday in the city, I remember why I moved out here in the first place (I only have a 5-10 minute drive to work).
I have a mortgage of $400,000 and I am the only income at $65,000 Luckily purchased in October and locked a fixed rate at 1.9% for 5 years. I think if I hadn’t done that I would have over extended myself
Man. 5 years at 1.9 is good. We just split ours on our first home and the fixed portion was 4.8 for 3 years.
Congrats to you mate ! Always an exciting time to buy a house I’m very lucky to be honest, thankfully should be pretty stress free for the next 4.5 years or so
Well played. Hope the market doesn't drop too much for you
Honestly i doubt it will. One of the benefits of buying in Tasmania !
Why do you say that? It is an overall poor state buoyed by interstate real estate money
Well there is a huuuuge housing crisis in Tasmania at the moment. So demand for houses are through the roof, even rentals are crazy expensive. If I were to rent out my house I would be making $300 profit a week after paying the loan and insurance. That tied into a lot of ‘mainlanders’ moving down to Tassie as they can work via distance. So the influx of more people with higher wages than the usual person in Tassie is driving he price up. Honestly Tassie is the best place to live, I am 5 minutes from the Hobart city, 4 minute walk to work, 20 minutes to a beach/surf beach. Plus you are getting awesome houses for similar prices to what Melbourne and Sydney were like 10 years ago or something. Look into houses around Hobart and you’ll see what I’m talking about
Second this, Hobart is the absolute best for lifestyle. Especially if you're from a city and struggle with the regional vibe. Houses are incredible in and around the city too.
Too cold, small and poor (economy + job prospects) for me and children. Battery point seems nice, but too expensive now.
Good. Stay on the mainland and we’ll stay here. And depends on your job, you can make BANK down here in certain fields.
Id be happy with a $570k mortgage on a $200k p.a. household income! Were looking to buy and might head into the $1.2m mortgage :/
Same issue here. Sometimes you gotta buy when you have to
Yep! I'm thinking this would be our forever home. So dont really care about the price as long as I get something I'm happy with
Don't say forever home... That's just an excuse for irrational splurging.
There is never a good time to buy in that case. Someone always has something negative to say. Good luck!
"dont really care about the price" is the quickest way to house poorness https://www.investopedia.com/terms/h/housepoor.asp#:\~:text=%22House%20poor%22%20is%20a%20term,taxes%2C%20maintenance%2C%20and%20utilities.
Sure but also recognise house poor is probably for ~10 years, followed by 'your lucky to have a wonderful home' for the rest of your life. Obviously endless edge cases like a getting a big mortgage at 65 doesn't seem sensible but generally putting more into your house at an early/mid stage of life is likely to benefit more people longer term than not.
Id rather pay 35k p.a. in interest than $35k p.a. in rent..
Exactly, I'm paying 33,600 yr in rent, already paid $104k for the pleasure of living in someone else's house, but that will soon end. We have to move city to get a mortgage, but it's worth it for a small mortgage under $300k
Where are you finding something under $300k? Or do you have a lot to contribute?
I have $160k - ish - deposit, either through the new Govt Help to Buy scheme ($150k or 30% of a $500,000 house) or from the bank of mummy. Looking at moving to central Qld Yeppoon area, 20mins south of Yeppoon in a place called Zilzie you can buy for around $450k.
As someone who has signed a contract around that general area (essentially northern Rockhampton suburb but is like 20 mins to Yeppoon) I can confirm both the FHLDS scheme and house prices here are both pretty good. Zilzie is sort of far if you are working in Rockhampton but not bad for Yeppoon. You are paying a bit higher just for being at the beach as you'd know but for 250-450k you can still find nice places around here. A colleague just convinced himself to buy too. He's paying $450 per week rent but him and his partner don't want kids so are looking at nice Queenslander homes for sub 300k. Even with a 300k loan his repayments would be less than rent and likely cover rates.
I agree, but thats not actually a fair comparison. For the same 35k place to rent, you'd have to pay 70k in mortgage. I choose to rent.
True - but the other 35k is equity. So imagine you're renting for 35k p.a. and putting away $35k p.a. in savings
It’s not equity when property falls 20%.
I plan to hold this property for 30 years.. not concerned about a short term "paper loss"
Go on then
Hate to break it to you but if house prices fall it’s paying 35k to hold a falling knife
its my forever home - not concerned about the price of the house after I buy it until maybe age 60 when i would look to retire and downsize (thats over 25 years away)
I don't think you get the 'catch a falling knife' analogy.
Home value is irrelevant if you never sell.
"One estimate of how much to spend on a home is 2.5 times your total gross annual salary", most new families who recently purchased in Australia are house poor.
That doesn't factor in interest rates so it's a terrible rule. Buying a house worth 2.5 times gross annual salary when interest rates are 17 percent is not the same as when interest rates are 3 percent. I'm willing to be that when someone came up with that rule, mortgage rates were probably around 7 percent. Good luck following that rule in 2022.
Oh, so close. We're at 2.92. We have a small loan though and bought in a much cheaper area. From what I can tell, most people borrow way more than this.
May I ask why you have to buy now?
Dont have to buy now. But looking to pull the trigger between now and prob April next year
Pretty standard to have >1mil mortgages in Sydney - I'm potentially looking at a similar mortgage size (if not bigger) on a similar income
I'm in Melbourne and the area I want to live in and have our kids grow up in will be a house of approx. $2m+ with about $1.2m mortgage. Could go up to $1.5m mortgage/$2.3m house if needed.. Always thought you should buy to the absolute max of what you can afford. Let the rest bend around that. Might be a pinch for a couple of years but why not? Like is the only risk losing an income? (obv interest rates and cost of living etc.) other than pinching the dollar when needed..i cant see why not?
not a financial expert, but I'd suggest it's probably a bad idea to borrow 1.2 million dollars for anything unless you're making extremely good money already, and even then it's a monster debt, how expensive is the house if you'd need to *borrow* 1.2 million?
Don’t do that! Lol
$1.2 is conservative :( might be 1.5!
With $200k p.a. household income?
just over $250k. like $15,500 net per month
That's not that bad. The only issue is if one of you losses a job.
is anyone holding a gun against your head? whats happening? wanna talk?
Consider this mortgage. I owe 900 on a house worth around 2.2/2.3, household income 210. We struggle but have 3 kids. Your situation may change a lot where that loan is unfeasible. It seems like 250 is high, but well there are some really high income earners out there. That’s a lot to owe.
Goodluck with that. Sounds stressful.
$200k household income, grew up live on the north side of Sydney, 15 mins from the coast. Cant buy a 3br+ house for under about $2.2m here. Can't foresee ever having a mortgage around where I grew up, where my job is, and the majority of family and friends. Rent til dead, earn 3x as much, or move out of Sydney is the options I see.
Similar situation with houshold incomes and price of area i grew up in but in inner eastern melbourne suburbs. Looking at moving north of where the family etc all are about 20-30mins. Might be able to afford something around the 1-1.1 mark which is not our max technically but the max we would comfortably spend. It feels like a big downgrade in ways but its the price to pay to own something of our own and its the reality for many people of our generation have to just accept. Can imagine sydney would be even worse for first home buyers
Probably not what you want to hear, but at 200k houshold income on the lower north shore I'd say you would be at or below median family/household income. You are also below median age, which is relevant because many others in your area are more than likely to have accumulated more wealth with time. Appreciate you are not asking for advice...if you work towards advancing your career and earnings then the 3br house could be attainable in a few years time. You're still young.
Agreed, I'm working hard to grow professionally and increase that household income, so that we could consider buying where our life is. Feels like people get spiteful in this subreddit the moment they see you're from the northern beaches. I'm not looking for a mansion, I'd be happy for a 70 year old weatherboard fixer-upper.
I mean, you always have the option of just living in a different part of Sydney?
For sure, I could move west, but when that means I'm over an hour away from my job, friends & family, and still paying the entirety of the takehome pay from my 120K job for a mortgage, I wonder what for. At that point I'd rather move out of Sydney. I'm not asking the world either. At $2.2m, you get a 40 year old 3 or 4 bed house on 700m2 with no pool etc. It's hardly luxury. At risk of sounding entitled, as a 33 year old university educated engineer, you don't think a small freestanding home for your wife and kids, 15 minutes from the beach should be an excessive ask.
> At risk of sounding entitled, as a 33 year old university educated engineer, you don’t think a small freestanding home for your wife and kids, 15 minutes from the beach should be an excessive ask. not having a go at you but how do you expect this to work? There’s only so many spots 15 mins from the beach. The only way for this to scale is for australians to embrace medium to high density living and build more quality apartments.
>At risk of sounding entitled, as a 33 year old university educated engineer, you don't think a small freestanding home for your wife and kids, 15 minutes from the beach should be an excessive ask. in this day and age I could never envision that being possible in syd. Good job, luxury living etc. Not unless you are looking at high density living. just too many people in syd and not enough land near the coast to be able to give everyone a 3 bedroom house etc for a reasonable amount.
Agreed, at this rate I expect I'll move out of Sydney in due time. Eventually though, Sydney may end up an aged population only, and the retirees will wonder where all the young people are, to fulfill the low-income critical jobs, like nurses, teachers, aged carers, retail workers. It'll be a ghost town
yeah maybe, they keep harping on about how melbourne will overtake sydney one day and I know alot of people have moved north to Qld. Hopefully more remote/work from home jobs take up and people are more willing to live and work outside of the main city hubs...I wouldn't mind living out west if it didn't feel like such a rip off for the privilege of living out here. the prices here are stupid af.
Most of my closest mates have spread far and wide now, with a few headed for Qld
Go away, it's shit here
You live in one of the most expensive cities in the world, you absolutely could, just likely not in Sydney. I grew up around you and will be 41 this year. Would love to own where I was raised, no chance. We had a 1 bedroom appt for 11 years ans paid it off by the time we moved. Now down to 1 income with a child, when income goes back to 1.5x (part time), will want to move out of our inner west semi to something further out and put up with the added travel. West isn't cheap, no where nice is cheap in Syd. Do your homework and consider areas you wrote off, you might be surprised what you find if you are willing to really re-look at your priorities, otherwise you're going to be grinding for a very meagre existence in a nice secluded area. I used to joke that the hbr bridge kept the ruffians out of the north, now going over the bridge feels like going back in time.
People act like it’s outrageous to ask for that and “Sydney’s an expensive city get over it” but simple fact is it doesn’t need to be and we’ve prioritised investment over ability to buy and live in a home and it’s pretty sad. All we want is what the generation before us had….so no it isn’t too much to ask. Similar situation here with >$200k household income and just feels like there isn’t an avenue without leaving Sydney
Thank you! Agreed.
Buy where you want to move to. https://www.realestate.com.au/property-house-qld-birkdale-139642859? https://www.realestate.com.au/property-house-qld-wynnum-139408123? https://www.realestate.com.au/property-house-qld-broadbeach-139280999? https://www.realestate.com.au/property-house-qld-burleigh+heads-139289823?
Lol, what. Not an excessive ask? Is this a troll? If not, delusion is a hell of a drug. And seemingly in endless supply on the North Shore.
This day and age, a 3br freestanding home is unrealistic, but it wasn't 30-40 years ago. What's the justification? I drive past 5 year old shacks needing renovations and dream of owning them.
Population grows, land doesn’t. Simple.
What about a townhouse? We recently bought a 4 bedroom 2 storey townhouse on about 200sqm of land and it's perfect for a family. Land is so expensive so if you can get a property on a smaller parcel of land it's more achievable.
We just moved out of a 40 year old 2br townhouse in a high density suburb 10 minutes from the coast, and they were all selling for $1.75M. Would have loved to own one. Decided to move slightly further west to get some space.
I had a good laugh after seeing the other replies to your posts so wanted to chime in and say you aren't crazy. You are spot on. Buying a free standing house in a good part of Sydney is simply unaffordable. I grew up in the country and we had a big house out there. When I was nearly an adult my folks moved the fam to Sydney and swapped our big house for a small townhouse in Western Sydney. I hated it because it felt like a downgrade but they decided it was the best choice at the time for various reasons. 15 years later I currently rent an apartment in a decent part of Sydney that I could only ever buy a small apartment in. I moved here because I can't handle a 1 hour commute into the city to work... it's horrible, dunno how people do it. The problem is population. Look at a chart of Sydney's population over time. 30 years ago there were 1 million less people vying for that same bit of land you want. It's only gonna get worse over time, with Sydney's population projected to increase by a few more million over the coming decades. Changing policies like negative gearing or introducing whatever first home buyer help scheme won't resolve this simple fact of population growth. I'm keen to get the hell out of Sydney as soon as possible, it's just a matter of working out the logistics of work for both my partner and myself. I don't know where to go or how to go about it. Central Coast? Maybe. Newcastle? Wollongong? Or a different state entirely? There's many options we are considering, and each has its own pros and cons.
How about a Unit?
Fair point, that's where I recognise my 2 very active kids need space, and that's the motive to move out of sydney, to give them that space without financially straining us.
I'm not a fan of income multiple figures, it completely ignores interest rates which is as we are seeing right now a critical piece of the puzzle, 4 x income when mortgage rates are 17% is a world apart from rates of 4 or 5% at 4 x income. % of income going to repayments makes far more sense to me and paints a better picture of how manageable a mortgage actually is for someone to have, but even that is not a full picture for some locations, a barista living in inner sydney will be paying a huge % of their income just to rent so it would be reasonable to assume they need to pay a higher % of income for a mortgage too, but a general rule of thumb is around 30% of your take home for shelter costs (rent or mortgage) is considered comfortable. having said all that, your situation looks frankly great, your annual repayments are something like $33k and your household income is 215k a very low percentage, I don't even need to work out your take-home amount as I can tell its still a very low percentage. A big mortgage for you might be annual repayments of 80k+ which is a loan approaching 1.5m in size... I reckon any mortgage these days of 1m+ is "big"
The problem is, once interest rate flip, the repayment changes drastically. In that sense, income multiple is a better predictor of being able to afford the debt until the end imo
depends on what you call drastically, an increase on a 570k loan from 2% to 5% increases your repayments from $25,284/yr to $36,720/yr which is significant, but compared to 18% of the early 90's the same loan would have repayments of $103,080 - now thats drastic Income multiples is nice to compare a crude form across decades, but as I say it completely ignores interest rates which is why I am not a fan, you need to have interest rates in your factor as that is better for comparing the current or recent situation, people in the early 90's would kill to have mortgage rates of sub 5% like we have now, and we would kill to have income multiples that they had back then.. what we can't have is the best of both worlds, low income multiples combined with low interest rates..
Multiples of income is useful in understanding price inflation. Tbh I prefer it only because it's useful in calculating median interest charges and wotif scenarios. Cost of living issues need to include interest charge simply because stress testors need it basically.
That's why markets stuck to 1/3rd.. because they wanted that breathing room for interest rate rises. What Aus seems to have forgotten is around 6% is normal and rates do rise. Don't disagree with you tbh, a percentage base now knowing that rates will eventually normalise makes more sense rather than a third at record lows.
1m mortgage is really not that bad for a couple with big incomes. It's all relative to income.
Big mortage is when your debt is 5x or more of your annual income pre-tax. From 1960 to 1990, it was 1x income: [https://www.macrobusiness.com.au/2013/02/the-history-of-australian-property-values/](https://www.macrobusiness.com.au/2013/02/the-history-of-australian-property-values/), went to 5x on 2010, [https://www.abc.net.au/news/2017-06-03/house-price-to-income-ratio/8586524](https://www.abc.net.au/news/2017-06-03/house-price-to-income-ratio/8586524) and now I think Sydney/Melb is at 8x? (no source) Another source: book "The Millionaire Next Door (1996)", the majority of people with 1M network paid 3-5x their annual income on their home, don't remember the exact %
For our household, we agree with u/crappy-pete as a multiple of income of more than 5x. APRA mentions concerns at 6x household income ([https://www.apra.gov.au/news-and-publications/apra-increases-banks%E2%80%99-loan-serviceability-expectations-to-counter-rising](https://www.apra.gov.au/news-and-publications/apra-increases-banks%E2%80%99-loan-serviceability-expectations-to-counter-rising)) as an increasing proportion of lending (article dates back to October). These mortgages are classed as "high" debt to income ratios. I could not find a reference (quick Google search only) but AFAIK, banks used to loan no more than 3 to 4x household income. This is the range we kept within for our mortgage last year. From your figures, I'd say you're good based on that - you're less than 4x household income. If you wanted to work out your ability to service your mortgage in an era of increasing rates, look at your current household budget and plug in your figures in a mortgage calculator to see where repayments start to get difficult for you (based on your current spending habits). In terms of $ figures - I don't have anything to say other than someone with a $10M household income is likely to be well able to service repayments on a multi-million dollar mortgage. TL;DR - it's better to use multiples of income rather than dollar figures.
A big mortgage is one where you have to cut back on home delivered food and takeaway coffee to pay it.
I'll tack on, a big mortgage to me is one where you're too scared to change your job in fear of instability. If you can't take positive career risks, a mortgage is too big for comfort.
I disagree or maybe I'll amend to I'll add, what about those stuck in a dead end job but have 3-4 mouths to feed, changing nappies, heaps of responsibility, relative mortgage but they have too much responsibility to take positive career risks? it's not the mortgage itself that's doing it.
Thats fear for a different reason. Its fair enough to want stability in those hectic years. Not really related to morrgage size though, probably someone renting in that situation would also desire stability. Having little kids is always a hard time but short lived luckily.
Had this sensation recently and realised it is not at all a good thing.
What about avo on toast?
Avo now cheap at $1 each, if you make your own. The brunch cafes must be raking it in.
I bought 2 Kilos for $3@Flemington markets this weekend :D
Wow subtle brag there with your fancy takeaway coffee
I can't recall when I've ever bought takeaway coffee. This was a hypothetical person
Personally I'd rather own my own home than piss away my money on take away coffees and uber eats.
General rule for me would be anything over 5-6 debt to income. But that’s just a general rule and a sliding scale based on your income level and expenses.
I'm a Mortgage Broker. A big mortgage is when your mortgage limit is a multiple of 7 x your total gross taxable income (pre tax income). This is known as a Debt to Income Ratio or DTI. Example, $100K base pre tax on a $700K mortgage is a 7 x DTI.
Anything over 5x income for most people
One where you stop sleeping permanently, just gaze at the ceiling in dread all night…
I have that even without a mortgage!
Big mortgage is when DTI is over 5
I find the city v non city location to live a very odd one, why to people hold on to city living at all costs? My industry like many are struggling to fill positions in non capital cities, so wages are higher, overtime opportunities are higher & housing is half. I’d much prefer to live away from traffic, own nice things, take weekends away & take a month long holiday overseas every year all while paying off a mortgage & putting saving aside. Why are people chasing million dollar houses in a capital city & struggling & having a poor life balance all to say they live in a million $ house…..there is more to life. But this is just my 2c
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OP didn’t ask for your balance sheet.
This was a reply to someone saying: "400k Mortgage. 80k income. $4400 Monthly take home, Repayments are $1700~ Im doing okay I think" Reply seems unnecessarily mean.... they were actually adding to the conversation.
Mine is $220K with an $80K income. I look at my outgoings for the property compared with rents for the same type of dwelling (2 bed apartment, living alone in the same area). I got my mortgage on $53K ($250K) and that was teetering on uncomfortable.
8x my household income.
Anything over 600k IMO
$120k family income (pretax), $300k mortgage. Pretty low I think. Once I'm back at work we might buy a different house, but for now we're very comfortably living within our means. Our borrowing cap is about $500k so that's what I'd consider big. It just depends on each person's circumstances.
That's nothing. I will be on a 400k alone with less than 100k income
Ours is 5.63 x income including rental income . Spread across 1 x PPOR and 2 x IP’s Paying principal and interest on all 3 of them. Which isn’t ideal as would like to pay interest only on the IPs but unable to refinance because wife is taking some time off work.
To build on this (forget the multitude of other factors): Would anyone feel comfortable to take on a $1.5m mortgage with a household income of $250k?
Probably not, but depends on your situation. If you are DINKs with very good career prospects, and you are good at sticking with a tight budget for at least 5 years (and not increase your spending or have kids) - then it’s potentially do-able.
Not on your Nelly
Glad my parents were poor and very realistic , if you want ocean views and a nice neighbourhood, go on holidays . Buy with 30% of your income as a loan repayment , live where you can afford not where you want . You could choose to buy a place to rent out and live where you want , just in case it goes belly up and you need housing , but that’s a different option.
Yeah the benefits of having to work for it all pay off in the long run. Same boat here, started with nothing, built our first place is 2017 in a less desirable area and it was tiny, like the smallest 4x2 you could build. Sold it in 2021 for a nice little profit. Rolled those funds over into our new place, 3x the size, 1km from the beach. Was in QLD moved to Perth so that helped a bit, new build again almost finished, going quick just had to wait a while for land to title, got in just before land and build prices sky rocketed, same house is now 70k more to build and land prices have gone up 10%. 120k solo income as wife is looking after baby, spent 550, owe 350, valued at 650, laughing.
I bought a 3 bedder house on 650sqm, 30 minutes from Brisbane CBD last year and with 20% down, my mortgage started at $165K. Payments are about $150 per week.
that's amazing, did you have a large deposit, as I can't imagine many 3 bedders within 30mins of Brisbane being less than 450-500k+ now (most places much more)
The price of the house was $210,000 and it was possibly the cheapest house in Southeast Queensland, in the worst neighbourhood. I used to live in LA though - and have found that the worst neighbourhood in Australia is safer than the best neighbourhood in Los Angeles. The house was in terrible condition and I spent about $20K getting it liveable and installing security cameras. Now it's quite comfortable- and I might be here until I die. I guess my point is, there's still cheap real estate around if you are willing to buy a shit hole and/or live in a shit hole neighbourhood. Most people aren't ... Edit: [For example ...](https://www.realestate.com.au/buy/in-goodna,+qld+4300/list-1?activeSort=price-asc)
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Exactly. Buy a shit box, fix it up over time ... eventually you have something that's not half bad. It's the Australian way. Feels like everybody wants to buy their first home on Bondi Beach.
that's really not bad at all, thanks for the info
a big mortgage dependant on the individual and their circumstances if your house hold earns 500k a year a 1m dollar home loan isnt that bad if your house hold earns 60k pa a 500k home loan is huge.... probably as a rough rule anything loan that is more then 5 or 6 x your house hold income.
Every time I read about DTI I cringe. Completely ignores interest rates, it’s like your parents complaining about their 15% interest rate on a mortgage of $100k. I would consider a big mortgage to be one that you couldn’t easily deal with an increase of interest rates to 5%. I’d argue if that would require changes to your lifestyle to accommodate you may be too leveraged.
I have always gone with 33% of my ‘take home’ pay for housing including rates and insurance. So on 200k single income a breezy mortgage would be about 3700/month. 200k with two earners would be around 4150/month because you get a tax benefit for your household if both people work. This will leave you with 66% of your take home pay left over for food, utilities, travel, and savings and you shouldn’t feel much stress with each mortgage payment.
Mine is $270k on a household income of $230k-$280K (depending on number of consultancies done in the year). I would consider ‘big’ anything that’s 4 x yearly income, but we are very risk adverse
I consider any mortgage bigger than mine a big one.
Household income $270k p/a, mortgage approx $800k. Still live very comfortable but still think borrowing any more than that can be a bit of a debt trap.
Anything more than 2 x a small mortgage is a big mortgage
We have 970k with household income 270k - we are both 31. I think next few years might be tough
They should make mortgage payments on your ppor tax a tax deduction, for property under 2m
Great idea, house prices would go up further while hollowing out the tax base the government has even less money to spend on things that have made our society half reasonable.
Mine is $1.6m
We make $265k + bonuses (avg $55k last 3 years) and are about to up our mortgage from $950k to $1.25m for an extension. House will be worth circa $1.9m-2.1m after depending on the market (bank just valued at $1.65 pre-extension). We bought last year for $1.07m Worth it for us, it should pay off unless something drastic happens. But to me it’s a big mortgage and risk right now.
Got a couple of mortgages totaling just under $900K and I consider that big - each rate rise hurts a lot more
It really depends on your earnings. If your mortgage is 30%+ your earnings, I'd say that is a big mortgage. I've always only borrowed around 15-25% of my total income. Bit of a safety net as if I ever get in a position I can always afford repayments.
One you struggle to pay back
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That is a great position to be in! I wish I was in that spot haha
Honestly depends. For a single person IMO anything over 800K is a "big mortgage". For a couple? I'd say over 1 - 1.2m
I know mathematically is 5\* income or whatever but I am not sure where people are finding properties than are less than 5x income - it's sort of ignoring the current real estate situation. I bought an apartment (which is hardly a full house) and even after saving 160K for deposit and closing costs I still had to take out a 540K loan. As a single person, it's less than 40% of my salary but it's close to it. I am not sure what options I had.
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Good luck buying anything in Sydney with $600k.
True enough, but 4/5ths of Australias population live outside of Sydney
I feel this way as well, I took on just under 600k and when you do the maths even that feels like a stretch when you add up all costs.
Anything with a loan to value ration greater than 80% Anything where minimum repayments are > 40% of income. I was at one stage in $1,500,000 in debt, but that was not big. It was against $2.8m in property and rent from one investment property covered most repayments, and I was paying down a huge amount more than I had to each month. I did not consider this a big mortgage.
>income X 6
I would say if it's going to take you longer than 10 years to pay off it is a big mortgage and poses a risk if rates go up significantly.
Crazy way to look at it lol. Assuming an interest rate of 2.65%. The mortgage payment required to tackle a loan in 10 years vs 30 is 2.35x as big. E.g. $1m mortgage, 2.65%, 30 years. Monthly payment = $4,030 $1m morgage, 2.65%, 10 years. Monthly payment = $9,485 Unfortunately, in this (Relatively) low rate environment, its ALOT harder to pay a mortgage off quicker, ironically. Because as rates increase, the disparity between 30 and 10 year mortgage payments actually decreases. At 5% interest, the 10 year:30 year rate payment ratio is 1.98 Perhaps 10-20 years ago, a DINK could crack on and get their small mortgage done in 10 years while rates slowly lowered, but it's pretty hard to do anymore.
Yep a smart way to look at it.
I’m pretty much in the same boat as you mate exactly lol 200k combined income 590k mortgage and have an investment property. PPOR is in Sydney market value around 1.1m and IP in Hampton Vic worth 800k+ with 520k owing.
Mine is about 2.3x my income.
Small for me is less than 2 yrs gross salary, and less than 10 yrs of annual saving.
This doesn’t really scale well with different income bands though
Looks like we’re all living in Ethiopia