Buying a $1 million home has become more common in Australia, especially as house prices continue to climb across major cities. However, with rising property values, it’s important to know how much income and savings you need to secure a mortgage on a home in this price range.
Rising Number of Million-Dollar Suburbs
According to recent data, a record 29.3% of Australian suburbs now have a median house or unit value of $1 million or more. This is a significant jump from previous years, highlighting just how common million-dollar homes have become. Sydney, Melbourne, and Brisbane are leading the way, with many suburbs crossing the $1 million threshold.
How Much Income Do You Need?
To afford a $1 million home with a 10% deposit (i.e., borrowing $900,000 on an example rate of 6.28%), a household would need a pre-tax income of approximately $222,000. This estimate assumes mortgage payments should not exceed 30% of gross income and includes factors like the current average interest rate and Lenders Mortgage Insurance (LMI). For couples, this works out to around $111,000 per applicant.
If you’re able to save a 20% deposit ($200,000) and avoid LMI, the required household income drops slightly to $198,000, or $99,000 per applicant.
The good news; interest rates are constantly changing, so if you are looking to buy soon, it’s essential to discuss your personal situation with your mortgage broker to get an accurate assessment of your true borrowing power and explore the loan options available.
The Challenge of Saving for a Deposit
Based on discussions with our clients at Brooke your Broker, the real difficulty for many buyers isn’t necessarily managing mortgage repayments but saving up for the deposit, at this price point, that is the real mountain to climb for many buyers. This is why we always stress the importance of borrowing within your means and considering more affordable suburbs or homes below the million-dollar mark if necessary.
Tips for Potential Buyers
- Explore government grants: Depending on your eligibility, various first-home buyer schemes could help ease the financial burden.
- Consider less expensive areas: You don’t need to get swept up in the race to buy a home in a trendy or expensive suburb. Sometimes, a more modest home or a less fashionable suburb can be a smarter financial decision.
- Manage expectations: Understand how rising interest rates and property prices can impact your ability to enter the market. Planning ahead and working with a broker can help navigate these challenges.
Want more information on how to secure a mortgage for a $1 million home? Contact your broker at Brooke your Broker to discuss your options and receive expert guidance tailored to your financial situation.
