The 30% rule: One of the key guidelines that many lenders use when determining how much you can borrow on a home loan is the 30% rule. This rule states that your monthly mortgage repayments should not exceed 30% of your gross income.
$70,000 salary
A $70,000 annual gross income with a mortgage at 5.99% p.a. equates to a loan amount of up to $391,222. With a 10% deposit contribution, the maximum affordable property price would be $434,691, or with a 20% deposit $489,027.
An annual after-tax $80,000 income with $1,000 in monthly expenses nets you a mortgage of just under one million. With an interest rate of 4% over 30 years, you'll see a monthly repayment of $4,800.
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.
To purchase a $300K house, you may need to make between $50,000 and $74,500 a year. This is a rule of thumb, and the specific salary will vary depending on your credit score, debt-to-income ratio, type of home loan, loan term, and mortgage rate.
On a $50,000 salary (before tax), you can borrow between $200,000 and $350,000 for the purpose of purchasing a property to live in to be repaid over a 30 years loan term.
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.
Income. This is the most important factor in determining how much you can borrow on your home loan. As a guide, it's best if your repayments don't exceed 30% of your after-tax salary. Use our calculators to get a good idea of what your repayments will be once you start making mortgage repayments on your new loan.
The 30% rule: One of the key guidelines that many lenders use when determining how much you can borrow on a home loan is the 30% rule. This rule states that your monthly mortgage repayments should not exceed 30% of your gross income.
It is well above the median annual salary in the United States and puts you in the top 35% income bracket for individuals. 100k a year is also considered a six figure salary, meaning that you are considered a high-earning salary.
Just multiply your annual before-tax salaries by 0.3333, then divide the result by 12. So if you bring home $150,000, you would get $49,995, divided by 12 – or $4166. This gives you the amount you should be able to comfortably afford to pay each month. But you also want to mortgage 'stress test' this for rate rises.
An income of $70,000 surpasses both the median incomes for individuals and for households. By that standard, $70,000 is a good salary.
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.
Some lenders understand this and let you borrow more than 80% of the property's value. Some will lend you up to 95% – meaning your deposit will be 5%, plus the associated purchase costs. This means that if the property you want is $400,000, 5% of that would be a $20,000 deposit – a bit more doable.
Monthly payments on an $800,000 mortgage
At a 7.00% fixed interest rate, your monthly mortgage payment on a 30-year mortgage might total $5,322 a month, while a 15-year might cost $7,191 a month.
For example, suppose you buy a home that appraises for $100,000. However, the owner is willing to sell it for $90,000. If you make a $10,000 down payment, your loan is for $80,000, which results in an LTV ratio of 80% (i.e., 80,000/100,000).
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.
If you make $500,000 a year living in Australia, you will be taxed $205,667. That means that your net pay will be $294,333 per year, or $24,528 per month. Your average tax rate is 41.1% and your marginal tax rate is 47.0%.
Monthly Payment For a $600,000 Mortgage
With a 5% down payment ($30,000) and an interest rate of 6%, you would pay $3417 monthly for a 30-year fixed-rate loan, not including taxes and insurance. For a 15-year fixed-rate loan, it would be $4809.
Going home with 50k AUD per annum isn't that good. However, this obviously also depends on where you live and what kind of lifestyle you (want to) have. Do you want to live life to the max? You probably will need to bring home 150k AUD per annum.
'Mortgage stress' increases to its highest since April 2012 with 24.9% of mortgage holders now 'At Risk' New research from Roy Morgan shows an estimated 1.19 million mortgage holders (24.9%) were 'At Risk' of 'mortgage stress' in the three months to January 2023.
But as a general rule of thumb, a debt/income ratio of 10% or less is outstanding. If it's between 10 to 20%, your credit is good, and you can probably borrow more. But once you hit 20% or above it's time to take a serious look at your debt load.