“How much do I need to earn to buy a house?”
It sounds like a straightforward question, but there isn’t one salary that guarantees you a mortgage. Two households earning the same amount could have quite different borrowing options.
Your income matters, but so do your deposit, expenses, debts and the lender assessing your application.
As a Mortgage Adviser, my job is to help you understand how those pieces fit together so you can set a realistic budget before you start house hunting.
There isn’t one minimum income that applies to every home buyer.
Lenders assess whether you can afford the amount you want to borrow after covering your everyday expenses and other commitments.
Someone earning less but carrying little debt may have more room for mortgage repayments than someone on a higher salary with larger financial commitments. Your salary alone doesn’t tell the whole story.
Lenders consider your income, deposit, household expenses, dependants and existing debts. They also look at your credit history and how reliable your income is.
They generally check affordability using a higher interest rate than the rate you would initially pay. This is often called a test rate and helps allow for repayments rising in future.
Banks also work within debt-to-income (DTI) restrictions, which limit higher-debt lending, and loan-to-value (LVR) restrictions, which limit low-deposit lending. These sit alongside each bank’s own affordability assessment.
Imagine two couples, each earning a combined $150,000 a year before tax, with a $130,000 deposit.
One has no children, minimal debt and relatively low household expenses. The other has two children, a car loan and credit cards with a combined $15,000 limit.
Their income and deposit match, but their financial commitments don’t. That can leave different amounts available for mortgage repayments and lead to different borrowing outcomes.
For the same property price, a bigger deposit means a smaller mortgage. That can make the repayments easier to manage.
Your deposit also affects your loan-to-value ratio (LVR), which is the proportion of the property’s value you are borrowing.
However, a large deposit doesn’t replace the need to afford the repayments. Equally, a strong income doesn’t automatically overcome a small deposit. The lender needs to be comfortable with both.
Yes. Car loans, personal loans, student loans and buy-now-pay-later (BNPL) commitments can all affect the assessment.
Credit cards can matter even when you owe nothing. A lender will consider the credit limit available to you, rather than just the current balance.
Before applying, we can review your debts and unused credit limits to see whether making changes could improve your position while keeping enough savings available.
Banks don’t all assess applications in exactly the same way. Their treatment of income, household expenses and existing commitments can differ, as can their test rates.
That means one bank’s answer may not be the same as another’s. It doesn’t guarantee another lender will approve more, but it can be worth exploring which lender may suit your circumstances.
Online calculators provide a starting point, but they can’t capture every lender’s criteria or all the details of your situation.
A conversation with a Mortgage Adviser before you start looking at properties can help you understand a realistic price range and what repayments could look like. The maximum a bank might lend also needs to fit comfortably within your own budget.
If you’re wondering whether your income is enough to buy a home, get in touch. We can look at your situation, explore your options and work out what could help you take the next step.