How Much Do I Need to Make to Buy a $500k House?
To successfully buy a $500k house in Australia, an individual will need to make around $100,000 per year to comfortably afford the monthly mortgage payments. This is because countless mortgage brokers and lending specialists do not recommend their clients to spend over 30% of their monthly wages on housing expenses, including mortgage repayments.
In addition to monthly mortgage repayments, an individual looking to purchase a home that costs $500k will need to put down a 20% deposit of $100,000. An individual’s ability to purchase a $500k home largely relies on their borrowing power. Borrowing power is calculated using an applicant’s salary, monthly expenses, loan amount, and interest rate, and allows a lender to determine the number of funds they can borrow and their capability of making the required mortgage repayments.
Borrowing power can be negatively (and positively) affected by the following examples:
- The amount of debt an applicant has
- The assets an applicant owns
- The number of dependents an applicant is responsible for
- The size of the home loan deposit
- The applicant’s credit score and financial history
- The applicant’s salary and monthly expenses
If an applicant receives a borrowing power calculation from their lender that they are not satisfied with, there are a wide variety of methods they can try to begin increasing their borrowing power, including the following examples:
- Closing unnecessary credit cards
- Decreasing high credit card limits
- Making consistent debt repayments
- Adding a guarantor to the home loan
- Saving for a larger home loan deposit