What Salary Do I Need to Afford a 1 Million Dollar House?
In Australia, housing prices are currently high, but the average income isn’t enough to afford high-priced homes. In order to be able to comfortably afford the mortgage repayments on a million-dollar home, you will probably need to make around $160,000. However, if you only make $160,000, you will need to find a lender who multiplies your salary by a factor of 6.25 when assessing your borrowing power. Because most lenders multiply borrowers’ salaries by a factor somewhere between four and six, you may have to have a salary closer to $200,000 to afford a home worth a million dollars.
How Can I Determine How Much I Can Borrow?
One of the best ways to estimate how much you can borrow is by using an online borrowing calculator. You can calculate your borrowing power by using your annual income, your deposit size, and your average expenses. Most lenders will use 30% of your annual income when calculating how large of a loan you can afford. Therefore, most online calculators also use 30% of your income when calculating your borrowing power. They also factor in your debts, assets, and monthly expenses.
Can You Afford a Million-Dollar Home?
In addition to your salary, your lender will also look at your debt-to-income ratio, your credit score, your deposit, and the current interest rate. A quick and easy way to determine if you can afford a million-dollar home before applying for a loan is taking 30% of your gross income, multiplying this number by an interest rate of 2.75% per year, of your desired loan term, and then add in the size of your deposit.
If you are interested in purchasing a million-dollar home or any size home, the brokers and lending specialists at Mortgage House can help you determine how large of a loan you can afford and then find you the best loan with the most competitive interest rate.