04 Nov 2022

What Salary Do I Need to Afford a 400k House?

Afford a 400k House

A potential borrower in Australia who is interested in purchasing a home that costs $400k will need to make a yearly salary of $66,000 through $100,000 depending on the individual mortgage broker or lending establishment. A mortgage broker will determine how much you are eligible to borrow by calculating your borrowing power. Borrowing power also allows a mortgage broker to accurately determine a borrower’s capability of repaying their mortgage. 

Borrowing power can be calculated using an online mortgage borrowing calculator, but you will need to have some information ready before beginning:

  • Monthly living expenses: food, medical, housing, bills, transportation, and more
  • Debt
  • Current loans
  • Pre-taxed income

You can easily calculate your ability to afford a $400k house by multiplying 30% of your gross income by a 2.75% per year interest rate, then adding in the loan deposit amount you will pay. 

Borrowing capacity can be affected by a wide variety of financial factors, including the following examples:

  • Salary, debt-to-income ratio and assets
  • Credit score and financial history
  • Credit cards and debt currently owed
  • Amount of dependents

If an individual is interested in purchasing a home that costs $400k but does not have the salary to match, they can still potentially purchase their home with increased borrowing power. Borrowing power can be increased through a wide variety of methods, including the following examples:

  • Improving their credit score and financial history
  • Making consistent debt repayments
  • Consider the addition of a guarantor to a home loan
  • Saving for a large loan deposit
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