What makes for an affordable home?

Rates and fees last updated on

Your financial position and the amount you earn plays a vital role in determining what "an affordable property" is for you.

What makes for an affordable homeWhen people talk about finding an affordable property, the discussion often centres on the performance of the real estate market as a whole.

While this influences housing affordability, the biggest factor that impacts upon how much you can afford to spend is your household income. The amount you earn and your financial position will identify the price range that you can afford to spend on a property.

Let’s take a look at the financial factors you should take into account when searching for an affordable property.

Your income

Most people don’t realise how important their income is until they can no longer rely on it. A regular income allows you to fund your lifestyle and meet whatever expenses may arise, including keeping up with your mortgage repayments from one month to the next.

However, seven in ten Australian households earn less than $100,000 in gross income every year, while 33% of Aussie households earn less than $52,000 each year. When you consider median sales prices in Australia’s capital cities, it is clear that housing affordability is an issue for many homebuyers.

The 2016 edition of Demographia’s Annual International Housing Affordability Survey revealed that the typical Australian house costs 5.6 times the median household income.

Number of dependents

The number of dependents you have reduces your disposable household income and thus affects your borrowing capacity. From school fees to insurance costs and medical bills, the number of kids you have can affect your ability to service a mortgage, and thus the type of property that you can afford.

A 2013 study by AMP and The University of Canberra found that the cost of raising two kids in Australia for a middle-income family is a whopping $812,000. More dependants means more financial commitments, which in term has an effect on the kind of property that you can reasonably afford.

Your assets

Another important factor contributing to your overall financial health and your idea of what constitutes an "affordable" property is the value of your assets. This could be shares, savings, real estate or a range of other investments. our lender will ask for details of your assets when you fill out a home loan application.

Generally, the greater the value of the assets you own, the higher your price range when buying a property.

Your liabilities

Before a lender or mortgage broker can work out how much home loan debt you can afford to take on, they will need to assess your ongoing financial commitments, commonly referred to as liabilities. From car loans and personal loans to outstanding credit card debt, HECS/HELP debt and even ongoing child support requirements, you’ll need to provide details of all your liabilities in your home loan application.

The lender will use the information you provide to work out your debt-to-income ratio — that is, the proportion of your monthly income that goes towards meeting your ongoing financial commitments. If your ratio is above the lender’s acceptable limit for the amount you want to borrow, they won’t approve your home loan application.

They may offer you finance for a reduced amount instead, which may indicate that the property you want to purchase is out of your price range.

Working out how much you can afford to borrow

Assessing all of the factors outlined above will help you form a clearer picture of how much money you can afford to borrow and comfortably repay — and therefore which homes are affordable for you. You can use our borrowing power calculator, which takes into account your income, expenses and number of dependants when calculating your repayment capabilities.

However, for specific advice tailored to your situation, the best thing you can do is ask a mortgage broker for advice. A broker will take the time to assess your overall financial situation now and how it will change in the future. They will then be able to give you a much more accurate idea of the amount you can afford to borrow and repay without putting yourself through financial hardship.

Once you know which properties are affordable based on your financial situation, you’ll be able to start house hunting in earnest.

See what your home loan repayments would be below

Rates last updated July 25th, 2017
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Interest Rate (p.a.) Comp Rate^ (p.a.) Application Fee Ongoing Fees Max LVR Monthly Payment
loans.com.au Essentials - Variable (Owner Occupier, P&I)
A basic home loan with a competitive rate and low fees.
3.64% 3.66% $0 $0 p.a. 80% Go to site More info
Greater Bank Ultimate Home Loan - Discounted 1 Year Fixed LVR ≤85% ($150K+ Owner Occupier)
Discount off an already competitive interest rate for loans over $150k. NSW, QLD and ACT residents only.
3.59% 4.48% $0 $375 p.a. 85% Go to site More info
UBank UHomeLoan Variable Rate - Standard Variable Rate Value Offer (Owner Occupier P&I)
Combine a low variable interest rate and free redraw with no application or ongoing fees.
3.74% 3.74% $0 $0 p.a. 80% Go to site More info
3.69% 3.72% $0 $0 p.a. 80% Go to site More info
Reduce Home Loans Rate Buster 100% Offset Variable Home Loan - Up to $750k (LVR <=80%)
Borrow up to 80% LVR with no ongoing fees and a 100% offset account.
3.54% 3.54% $440 $0 p.a. 80% Enquire now More info
NAB Choice Package Home Loan - 2 Year Fixed (Owner Occupier P&I) First Home Buyer Special
A special rate for first home buyers buying residential property and borrowing over $150K. 350K NAB Rewards Points offer available. Terms and conditions apply.
3.69% 4.86% $0 $395 p.a. 90% Go to site More info
loans.com.au Offset Variable - Up to 80% LVR (Owner Occupier P&I)
Take advantage of a 100% offset account along with no annual or application fees.
3.72% 3.74% $0 $0 p.a. 80% Go to site More info
Mortgage House Advantage Home Loan 80 - Special Owner Occupier ($500K+)
A low interest rate home loan that lets you borrow up to 80% of the property's value.
3.73% 3.88% $0 $10 monthly ($120 p.a.) 80% Go to site More info
ING DIRECT Orange Advantage Loan - $150,000+ (LVR <=80% Owner Occupier, P&I)
A fully featured home loan with an offset account and discounts available. $1000 cashback offer available for loans over $300k. Terms and conditions apply.
3.79% 4.11% $0 $299 p.a. 80% Go to site More info
State Custodians Low Rate LOC - LVR 80% to 90% (Owner Occupier)
Borrow up to 90% of property's value and pay no application fee.
3.79% 3.82% $0 $0 p.a. 90% Go to site More info
Newcastle Permanent Building Society Fixed Rate Home Loan - 2 Year Fixed (Owner Occupier Special Rate, P&I)
Owner-occupiers can lock in a competitive rate with no ongoing fees. Conditions apply.
3.84% 4.86% $0 $0 p.a. 95% Go to site More info
SCU Basic Variable Rate Home Loan
A basic home loan with a low interest rate and a redraw facility available. Take out a new SCU loan and enjoy $500 cash back on loans above $150k, terms and conditions apply.
3.77% 3.81% $200 $0 p.a. 95% Go to site More info
NAB Choice Package Home Loan - 2 Year Fixed (Owner Occupier P&I)
A fixed rate package with flexible repayment options. 350K NAB Rewards Points offer available. Terms and conditions apply.
3.88% 4.89% $0 $395 p.a. 95% Go to site More info
Greater Bank Great Rate Discount Variable with Family Pledge Home Loan - Up to 110% LVR
Discounted rate available with family pledge loans. Family pledge loans require no LMI and no deposit. NSW, Qld and ACT only.
3.99% 3.99% $0 $0 p.a. 110% Go to site More info
3.99% 4.04% $600 $0 p.a. 90% Go to site More info
HSBC Home Value Loan - Resident Owner Occupier only
Enjoy a low variable rate with no ongoing fees and borrow up to 90% of the value of the property.
3.85% 3.86% $0 $0 p.a. 90% Go to site More info
ClickLoans The Online Home Loan - Owner Occupier ≤ 80% LVR, P&I
Enjoy a competitive variable interest rate, no application fee, limited annual fees and an offset account with redraws.
3.69% 3.69% $0 $0 p.a. 80% Go to site More info
IMB Budget Home Loan - LVR <=90% (Owner Occupier)
Get a competitive rate without features you may not use.
3.97% 4.02% $445 $0 p.a. 90% Go to site More info
Finsure Home Loan Deal
Enjoy a low variable rate with no application fee.
3.69% 4.03% $0 $299 p.a. 80% Enquire now More info
P&N Bank & Home Loan & Bag
A flexible low-rate variable home loan that lets you combine your loan with other financial products.
3.99% 4.02% $395 $0 p.a. 80% Go to site More info
ME Flexible Home Loan Fixed - 2 Year Fixed Rate (Owner Occupier, P&I)
No application or ongoing fees and a competitive 2 year fixed rate.
3.88% 4.84% $0 $0 p.a. 95% Go to site More info
Select Encompass Credit Union Special Offer 2 Year Fixed Rate Home Loan
A fixed rate loan with limited fees and a competitive interest rate.
3.74% 4.15% $0 $0 p.a. 95% Go to site More info
SCU My Life Fixed Rate Home Loan Package - 3 Years
Fix your rate for 3 years and borrow up to 95% LVR. Enjoy $500 cashback on new loans above $150k. Terms and conditions apply.
3.69% 4.00% $0 $350 p.a. 95% Go to site More info
Beyond Bank Low Rate Special Home Loan - LVR <70%
A special low variable rate for owner occupiers with 100% offset account and no application or ongoing fees.
3.83% 3.83% $0 $0 p.a. 70% Go to site More info
Newcastle Permanent Building Society Premium Plus Package Home Loan - New Customer Offer ($150,000+ Owner Occupier, P&I)
Apply for a new owner occupier loan or refinance from another lender and receive this discounted rate.
3.84% 4.22% $0 $395 p.a. 95% Go to site More info
Mortgage House Advantage Variable Home Loan - 70 (PAYG Special No Offset)
A home loan with a competitive interest rate and flexible repayment that has a maximum LVR of 70%.
3.64% 3.66% $0 $0 p.a. 70% Go to site More info
Greater Bank Ultimate Home Loan - Discounted 2 Year Fixed LVR ≤85% ($150K+ Owner Occupier)
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3.79% 4.46% $0 $375 p.a. 85% Go to site More info
QT Mutual Bank Mortgage Saver Home Loan
A low rate home loan with no application or ongoing fees. Note that to be eligible for this loan you must be QLD resident.
3.95% 3.95% $0 $0 p.a. 95% Go to site More info
4.59% 4.90% $0 $0 p.a. 95% Enquire now More info
Greater Bank Great Rate Home Loan - Discounted Variable ($150K+ Owner Occupier)
A competitive variable rate with a redraw facility. NSW, QLD and ACT residents only.
3.99% 3.99% $0 $0 p.a. 85% Go to site More info
NAB Base Variable Rate Home Loan - Owner Occupier (P&I)
A competitive no frills home loan. 350K NAB Rewards Points offer available. Terms and conditions apply.
4.17% 4.21% $600 $0 p.a. 95% Go to site More info
IMB Essential Home Loan - LVR <=90% (Owner Occupier)
Get access to a redraw facility and offset account without the annual fee.
4.19% 4.19% $0 $0 p.a. 90% Go to site More info
ME Basic Home Loan - LVR <=80% (Owner Occupier, P&I)
A low variable rate loan with no application or ongoing fees.
4.09% 4.11% $0 $0 p.a. 80% Go to site More info
NAB Choice Package Variable Rate - $250k to $749,999 P&I (Owner Occupier)
Package your home loan to get discounts on your interest rate and other financial products.
4.39% 4.78% $0 $395 p.a. 95% Go to site More info
ME Flexible Home Loan Fixed - 3 Year Fixed Rate (Owner Occupier, P&I)
A competitive 3 year fixed rate with a redraw facility and split loan options, plus no application fee.
4.19% 4.82% $0 $0 p.a. 95% Go to site More info
Newcastle Permanent Building Society Fixed Rate Home Loan - 2 Years Fixed (Standard Rate, P&I)
Enjoy a low interest rate and borrow up to 95% (with LMI) of your property's value.
4.14% 4.92% $0 $0 p.a. 95% Go to site More info
4.59% 4.93% $0 $0 p.a. 95% Enquire now More info
NAB Choice Package Home Loan - 5 Year Fixed (Owner Occupier P&I)
A competitive loan with flexible features. 350K NAB Rewards Points offer available. Terms and conditions apply.
4.59% 5.01% $0 $395 p.a. 95% Go to site More info
Newcastle Permanent Building Society Fixed Rate Home Loan - 3 Years Fixed (Standard Rate, P&I)
Split your loan for free with one of the lowest fixed home loan rates.
4.19% 4.86% $0 $0 p.a. 95% Go to site More info
Bank of Queensland Fixed Rate Home Loan - 3 Year Fixed Rate (Owner Occupier, P&I)
Borrow up to and fix in a 3 year home loan rate. Access your account via internet and phone banking.
4.39% 5.42% $300 $10 monthly ($120 p.a.) 95% Enquire now More info
Newcastle Permanent Building Society Fixed Rate Home Loan - 3 Year Fixed (Owner Occupier Special Rate, P&I)
A limited time fixed rate home loan with extra repayment abilities. Conditions apply.
3.89% 4.78% $0 $0 p.a. 95% Go to site More info
ANZ Simplicity PLUS Home Loan - Special Offer (Owner Occupier, P&I)
Enjoy a basic home loan with a high LVR and no application or ongoing fees.
4.03% 4.07% $0 $0 p.a. 95% Enquire now More info
3.78% 3.79% $600 $0 p.a. 90% Enquire now More info
St.George Basic Home Loan - Promotional Rate (Owner Occupier, P&I)
A no frills loan with a competitive rate and a maximum LVR of 95%.
3.80% 3.81% $0 $0 p.a. 95% Enquire now More info
Commonwealth Bank Wealth Package Fixed Home Loan - 2 Year Fixed (Owner Occupier) P&I
A package home loan with fee free extra repayments available during the fixed term.
3.99% 4.99% $0 $395 p.a. 95% Enquire now More info
St.George Fixed Rate Advantage Package -  2 Year Fixed Rate (Owner Occupier, P&I)
A discounted package rate for owner occupiers with the ability to package a Qantas rewards earning Amplify credit card. $1,500 cashback available for refinancers. Conditions apply.
3.99% 4.98% $0 $395 p.a. 95% Enquire now More info
Westpac Fixed Options Home Loan Premier Advantage Package - 2 Years, P&I
Lock in a discounted fixed rate with a low service fee.
3.88% 4.88% $0 $395 p.a. 95% Enquire now More info
Virgin Reward Me Variable Home Loan - LVR <= 80% ($750k+ Owner Occupier, P&I)
Earn Velocity points on a competitive variable rate home loan with flexible features.
3.79% 3.92% $0 $10 monthly ($120 p.a.) 80% Enquire now More info
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