What makes for an affordable home?

Rates and Fees verified correct on February 25th, 2017

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 February 25th, 2017
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Interest Rate (p.a.) Comp Rate^ (p.a.) Application Fee Ongoing Fees Max LVR Monthly Payment
Newcastle Permanent Building Society Premium Plus Package Home Loan - New Customer Offer ($150,000+ Owner Occupier)
Apply for a new owner occupier loan or refinance from another lender and receive this discounted rate.
3.74% 4.12% $0 $395 p.a. 95% Go to site More info
HSBC Home Value Loan - Resident Owner Occupier only
Enjoy the low variable rate with $0 ongoing fee and borrow up to 90% LVR.
3.75% 3.77% $0 $0 p.a. 90% 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% 4.42% $0 $375 p.a. 85% Go to site More info
IMB Budget Home Loan - LVR <=90% (Owner Occupier)
A competitive budget rate without any unwanted bells and whistles.
3.87% 3.92% $445 $0 p.a. 90% Go to site More info
Beyond Bank Low Rate Special Home Loan
A special low variable rate for Owner Occupier with 100% offset account and no application or ongoing fees.
3.73% 3.73% $0 $0 p.a. 70% Go to site More info
Switzer Home Loan
No upfront or ongoing fees and a competitive variable rate for owner occupiers.
3.89% 3.89% $0 $0 p.a. 90% Go to site More info
Auswide Bank Home Loan Plus with Freedom Package - Special Package Discount LVR <= 90% (Owner Occupier) P&I
A high maximum LVR home loan with redraw facility and additional payments.
3.79% 4.18% $0 $395 p.a. 90% Go to site More info
CUA Fresh Start Basic Variable Home Loan - Owner Occupier
A basic mortgage with flexible repayments options.
3.89% 3.94% $600 $0 p.a. 90% Go to site More info
Newcastle Permanent Building Society Fixed Rate Home Loan - 2 Year Fixed (Owner Occupier Special Rate)
A limited time 2 year fixed rate for owner occupiers. Conditions apply.
3.89% 4.79% $0 $0 p.a. 95% Go to site More info
3.85% 4.26% $0 $395 p.a. 80% Go to site More info
ING  DIRECT Orange Advantage Loan - $150,000+ (LVR <= 80% Owner Occupier)
A competitive variable interest home loan offer from ING DIRECT.
3.89% 4.11% $0 $199 p.a. 80% Go to site More info
Bank Australia Basic Home Loan - Variable (Owner Occupier)
A competitive variable that allows borrowers to borrow a minimum of $100,000 with a $0 ongoing fee.
3.79% 3.83% $0 $0 p.a. 80% Go to site More info
CUA Fixed Rate Home Loan - 2 Year Fixed (Owner Occupier)
A fixed home loan with no ongoing fees and flexible repayments options.
3.84% 4.59% $600 $0 p.a. 95% Go to site More info
Australian Unity Kick Starter Home Loan
$0 ongoing service fees, maximum 80% LVR and a linked transaction account.
3.79% 3.82% $600 $0 p.a. 80% Go to site More info
Newcastle Permanent Building Society Fixed Rate Home Loan - 3 Year Fixed (Owner Occupier Special Rate)
A limited time fixed rate home loan with extra repayment abilities. Conditions apply.
3.99% 4.73% $0 $0 p.a. 95% Go to site More info
3.94% 4.33% $0 $395 p.a. 90% Go to site More info
Bank Australia Premium Home Loan Package - 2 Year Fixed (Owner Occupier) LVR < 80%
A discounted 2 year fixed rate loan with high maximum LVR and no application fee.
3.69% 4.31% $0 $350 p.a. 95% Go to site More info
Newcastle Permanent Building Society Fixed Rate Home Loan - 2 Years Fixed (Owner Occupier)
Enjoy a low interest rate and borrow up to 95% (with LMI) of your home value.
4.49% 4.90% $0 $0 p.a. 95% Go to site More info
Greater Bank Great Rate Home Loan - Discounted Variable ($150K+ Owner Occupier)
A competitive rate with redraw facility. NSW, QLD and ACT residents only.
3.89% 3.89% $0 $0 p.a. 85% Go to site More info
Bank Australia Premium Home Loan Package - LVR<=80% $700k + (Owner Occupier)
Enjoy the discounted interest rate with redraw facility and no ongoing fees.
3.82% 4.17% $595 $350 p.a. 95% Go to site More info
Newcastle Permanent Building Society Fixed Rate Home Loan - 1 Year Fixed (Owner Occupier)
Get a short term fixed rate for that investment property with no application or ongoing fees.
4.49% 4.95% $0 $0 p.a. 95% Go to site More info
ME Flexible Home Loan Fixed - 3 Year Fixed Rate (Owner Occupier)
A competitive 3 year fixed rate with a redraw facility and split loan options, plus no application fee.
4.09% 4.80% $0 $0 p.a. 95% Go to site More info
Australian Unity Health, Wealth and Happiness Package - (Owner Occupier)
Get a 0.60% discount on your rate, a 100% offset account and no ongoing fees.
4.05% 4.08% $600 $0 p.a. 90% Go to site More info
Australian Unity Wealth Builder Investor Package Home Loan - Variable
An investment loan with no ongoing fees and borrow up to 90% LVR.
4.19% 4.22% $600 $0 p.a. 90% Go to site More info
Newcastle Permanent Building Society Fixed Rate Home Loan - 3 Years Fixed (Owner Occupier)
Split your loan for free with one of the lowest fixed home loan rates.
4.59% 4.89% $0 $0 p.a. 95% Go to site More info
IMB Essential Home Loan - LVR <=90% (Owner Occupier)
Get a discount on your rate and flexible repayment options with this loan.
4.09% 4.09% $0 $0 p.a. 90% Go to site More info
ANZ Simplicity PLUS Home Loan - Special Offer (Owner Occupier)
Enjoy a home loan with no aplication fee or ongoing fee.
4.03% 4.07% $0 $0 p.a. 95% Enquire now
3.88% 3.89% $600 $0 p.a. 90% Enquire now
Westpac Flexi First Option Home Loan - 3 Years Introductory Special Offer (New Owner Occupier, P&I)
A limited time deal for new owner occupiers. Advertised rate includes 1.03%p.a. discount for the first two years.
3.99% 4.37% $0 $0 p.a. 95% Enquire now
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%.
4.08% 4.09% $0 $0 p.a. 95% Enquire now
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% 5.00% $0 $395 p.a. 95% Enquire now
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 cash back available for refinancers, conditions apply.
3.99% 5.04% $0 $395 p.a. 95% Enquire now
Westpac Fixed Options Home Loan Premier Advantage Package - 2 Years
A low interest rate home loan and competitive two year fixed rate.
4.19% 5.32% $0 $395 p.a. 95% Enquire now
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HSBC Home Value Loan - Resident Owner Occupier only

Enjoy the low variable rate with $0 ongoing fee and borrow up to 90% LVR.

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.

Newcastle Permanent Building Society Premium Plus Package Home Loan - New Customer Offer ($150,000+ Owner Occupier)

Apply for a new owner occupier loan or refinance from another lender and receive this discounted rate.

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