I earn $150K and my wife $40K (part -time) a year. We were thinking to buy a house, applied for a loan and got approved for $900k only. Is that what normally people get approval for with that income or should I shop around?
Just wondering how people purchase houses for $1.5 mil or above. They must be very rich or earning $300K+ (together) a year to buy anything for $1.5 mil or so?
Very sad at the moment.
There are 766 houses and 367 townhouses listed for sale in the Sydney Region under $900K.
Many more in the other capital cities.!
I dont see a problem
But yes exactly as you said….
If it is your first house, you probably won’t be able to afford $1.5m.
There are 766 houses and 367 townhouses listed for sale in the Sydney Region under $900K.
The majority of those houses are probably duplexes, or they are falsely listed as houses despite being a townhouse or unit.
For the rest of them, the price (or price range) is just a guideline, and they will probably sell over that. A lot of them don't have a specific price, but they fall under the price range you searched for because the agent put the range in there to attract more buyers.
And, finally, the ones that are actually houses and under $900k are probably mostly duds, i.e. there is something majorly wrong with them, like being located at a busy intersection where you can enjoy the roar of car engines and the smell of petrol fumes all day, improving your lung health.
Or they require half a $ million worth of renovation to be comfortable and/or liveable for the next few decades.
Yes check the "Sold" price. It will probably be over $900k.
Also if you buy a 50 year old crumbling house/unit in Sydney under $900k, you probably need to spend $300k over next 10 years just to make it habitable or it might even need to be demolished and rebuilt.
@techno2000: I hate having to defend this, because I 100% agree property prices are absurd, but consider the OP could borrow $900k, so they must have some deposit as well.
And there are many units available in Sydney that are fine for less than $900k, and stats this week from domain say the average unit price is below $900k everywhere except the eastern suburbs and north:
https://www.domain.com.au/news/its-very-disheartening-sydney…
It sucks to have to pay such prices, but it isn't true people can't buy a home with nearly a million dollars, just not the ones they wish for.
Edit: added north as I didn't see the whole table on my phone.
@mskeggs: ^this. You have to assume at least $200k as deposit if looking for something northof $1m. So even at $1.1m there are a lot of options.
Shop around with mortgage brokers.
But just keep in mind your repayment, just because you get approved for more, can you actually afford the repayment.
Some people already own a house and sell it and use equity plus their income to buy in Sydney at $1.5m. So don't compare.
Have you considered first home buyer grants.
Do you want a house? If so you have to look on the outskirts of sydney
If you flexible on townhouse or apartment? you have more options
Is it possible for both partners to work full time?
It definitely helps if both of your partners work full time.
It definitely helps if both of your partners work full time.
Yes and live a miserable life together of work and financial stress
Woosh?
Are they in open relationships?
4 incomes would definitely help!
Spend both of your entire lives slaving and saving to buy the $1.5 million cardboard house.
This is the way
And you'll need it if you want your kids to have a chance to buy a house of their own after you die. Or half a house of their own if you have two kids.
Leaving your house to your children is no longer a thing. Higher powers require you to reverse-mortgage your primary place of residence if you want to be able to afford aged care.
I'd rather lob myself off a building than pay those pricks a cent.
I'd rather live in an apartment and enjoy life.
The alternative is to spend your entire life slaving away to pay for someone elses mortgage.
Yep, just, whatever you do, rent or buy, don't think about the decision enough to choose something older, smaller, or less conveniently located than average (despite all the evidence that the average Australian is financially illiterate).
The most important thing in life is to be stuck in a dead-end job and live each day stressed out every waking hour so you can afford stuff that impresses random acquaintances who don't care about you.
By the time, you probably need 2m
you can shop around but you wont magically be able to borrow 600k more even if you shop around…
Just wondering how people purchase houses for 1.5 mil or above. They must be very rich or earning 300K+ (together ) a year to buy anything for 1.5 mil or so?!
Inheritance (If you have ever been to an auction, you notice when 20yo couple easily outbids you)
Yeah it's about 98% Numbers 1 and 6.
That's about right for your household income. People are affording $1m+ houses by starting smaller (e.g. an apartment or starter house further away from CBD), building up capital over the best part of a decade, and then upgrading.
Also you're mostly competing against households with 2 full time incomes. A semi-stay at home partner is a luxury these days.
There's a new financial institution being tapped by thousands of Sydneysiders: The Bank of Mum and Dad.
BMD has enjoyed considerable asset growth over the last few decades and may be able to tap some of that to help the kids. Only problem is BMD sometimes lacks money itself, or simply doesn't exist.
The other alternatives are: earn more, buy something further from the CBD, save a larger deposit, cut expenses and any hope of having children for the next 10 years while you save everything possible.
Hi OP, its smaller because the rates are high right now, if it was a lot lower you'd probably be able to borrow a lot more. But Guess What :O The prices will also go up by that much.
Also most have something to supplement it, like a parent/another home/deposit etc to make that $200K to $400K extra.
High rates definitely making a huge difference to borrowing power.
4 years ago I was earning $20k less and my borrowing power was literally 2.5x what it is today, since rates were so low back then that interest payments would barely put a dent in my monthly take home pay.
So 4 years ago, you were able to borrow 2.5 times what it is today? So for example, if you were able to borrow 800k 4 years ago, you can only borrow 320k now.
Sounds too extreme but probably your expenses might have gone up significantly within the last 4 years, like having 2 kids or more?
4 years ago I was earning 160k and NAB said I had borrowing power of $2.5m (which I thought was ludicrous at the time).
Today when I use their borrowing calculator I have borrowing power of 880k.
Edit: expenses have not significantly changed
@b4rg41nz: 2.5? really?? before covid it was about 7x maybe 8x if you push the numbers a bit in terms of gross income: servicing ability. now it's more like 3.5-4.5x
2.5mil sounds way out of range
@May4th: I too was shocked at $2.5m and thought there would be no way that could ever be serviceable and would be a death sentence if rates increased.
If I put my pre-covid numbers into this calculator at 2% interest rates it gives me a borrowing power of $2.115m
https://www.benchmarknational.com.au/borrowing-capacity-calc…
I earn 150K and my wife 40K (part -time) a year. we were thinking to buy a house, applied for a loan and got approved for 900k only.
How much deposit do you have and where do you want to purchase?
Once upon a time people started off with a starter home. This was a smaller house, maybe a townhouse or apartment or needed fixing up, in an outer suburb. Now it seems like everyone wants to jump straight into a forever home.
forever home.
Yea and forget things like
The jobs they have aint forever.
The neighbours next door are from hell
The partner runs off (or they do the same)
Grey Subway tiles arent the vogue
A kid comes along and the local school sucks
Here for the grey subway tile hate
Once upon a time people bought houses in their 20's, interesting how a "starter home" might be less appealing if you're unable to afford a home until you are 30 plus.
There is no comparison to 30-50 years ago to now.
Buying a home in the 80s you could have a single income with job security, stay at home mum, average job and have a basic house.
Now you need two full time incomes, kids dumped in daycare 10-12 hours a day, for a basic shitbox 2 hours commute from the city; and only if your incomes are good.
Howard and Costello (profanity) us over big time and all politicians since haven’t had the guts to fix the problem.
Quality victim blaming. There are no 'starter' homes anymore everything is a 'luxury townhouse/apartment' that's still priced a million dollars because it has some stone benchtops and extra tiles.
Also the term forever home is dumb as rocks, almost no one lives in their first house for their entire life
Talked to a boomer recently who bought a plot of land (800m2) in Baulkhalm Hills (Sydney) for $3,900 and built his first house for $12,500 in 1965. I believe the currency was still the pound at the time. Houses in this area now goes for around $2mil at the low end and $5mil at the high end for similar or bigger size.
baulkham hills has exploded but 5mil?? for 1000sqm+ mansions in castle hill maybe
They would have a massive deposit from making their own smashed avocado on toast at home using avocados always bought on special.
Flour, water, salt, oil, and green food dye. Mix until sad.
ooft. Sounds nasty! And it'll be carb on carb and no nutrients! Let's settle for a bag of the odd bunch with a 5x points booster from woolies everyday rewards, or an old dying tray of it from the local markets?
Legit tho, I’ve seen smashed avo as high as $25 at a cafe.
If they’re spending that much on brunch several times a week, imagine what they spend on lunch, dinner, night outs, travel etc
Pachinko
Step 1 - Be rich
Step 2 - Buy house
Step 3 - ???
Step 4 - Profit
In this new banking age, most places won't lend much more than 5x total combined income, especially if first home loan …
lol 900k loan,f**k that
Go back in time 30 years
Do you have a deposit? Having 10% to 20% deposit makes repayments much easier. Don't buy beyond your comfort limit (i.e. what repayments you can comfortably make regardless of how much the bank lends you). $900K is a lot of money to repay.
Consider smaller units / townhouses - maybe further from city.
shop around with mortgage brokers.
Only people buying in Sydney are those with an onlyfans page.
feet pics $$$
onlychans
There's plenty of houses for under 1mil past Blacktown
Typical - everyone these days wants to start towards the top of the property ladder.
How about lowering expectation and build you way up?
ps - that's the way the older generation did it.
The way the older generations did it was to start off… with a mortgage… for a house.
…for a house …. that cost three times the annual income ….. of the sole income earner.
I’m 100% on board with the ridiculous prices, but back when houses were cheap the average place was 3 times average income.
If you wanted an above average place you still needed to pay above average prices, and young people buying their first property would usually earn under the average income, so correspondingly bought cheaper houses.
A big change has been the size of our cities. A starter home in 1970 might have been at Revesby or North Parramatta, now they are obviously 5 times as distant.
Rubbish - try 5 times the combined income of me and my wife, both working 2 jobs.
Youngsters these days would prefer to buy the latest gadgets, $5.00 coffee's and then whinge about saying they cannot afford to buy a property.
Matter of priorities.
What the bottom or middle of the ladder looks like is quite different these days. My parents bought their starter home as 3bdr house on a quarter acre in the 70s. With similar jobs you couldn’t do the same now. Realistically what is a modest home now vs then are very different. A modest home is now a unit or townhouse.
But expectations have to be quite low given the income to house price ratio change
https://www.datawrapper.de/_/1IvLJ/
Sydney is genuinely difficult are wages aren’t that much higher than the rest of the country, but houses are.
Older generations did not have 1.5m house prices. Also older generations actually did not buy and sell constantly, they stayed in one place for generations.
Older generations did not have 1.5m house prices. Also older generations actually did not buy and sell constantly, they stayed in one place for generations.
They did? My parents lived in 8 different houses. My siblings and I lived in 6 of them.
Your credit cards probably killed your chances. You need to drop your CC limit to say $3K when you apply and then after approval request and increase if the bank will allow it.
I would suggest you ask the bank what things caused the prelim approval for $900K.
Watch the wording as they do not give you full approval for a loan before you buy a place as they may reject the loan if the place does not meet the banks valuation.
Doubt it, payments on 900k against ~$150k take home is over 40% on the mortgage. Unless you are on 300k+ household (which of course everyone on the internet is) no bank will approve you a loan that has over 50% of your pay in repayments
currently servicing is roughly 4x gross income. OP has a 200k household income. there's no reason that he can't get a 1mil house at 80% LVR with a good broker
Car finance too - if you have any - takes a dent
1.5mil+ in general will not have 1 income as part time - the household income will b made up of 2x professional full time workers.
Note - always exceptions for those on somewhat decent single income $250k+
You should try to save a larger deposit as quickly as possible. More Australians are choosing partners mainly based on their income these days.
What's your expenses? If you're earning 10k a month and spending 9k then the bank won't lend you much.
Yes, you are correct. You have to be quite rich to purchase a $1.5m home as your first residence.
I paid $1.5m for my current place in 2018 but the journey looked like this:
NB: All my places I value added using (mainly) my own labour).
Kogarah: 1 bedroom apartment on a main road under the flighpath: Bought 1981 $30k (borrowed $15k. I have no idea how we managed to save that deposit, it was about 14 months pay ). Sold AT A LOSS 1984 $28k. Replaced the kitchen benchtop, carpeted, painted and other minor stuff.
Rented a while.
Kogarah: 2 bedroom, 1 bathroom, 1 garage, weatherboard house with an easement over 1/3 the property. Bought 1986 $100k (borrowed $60k). Sold 1991 $175k. Reskinned & painted the whole exterior. Fitted a slow combustion stove because the place was a fridge in winter. Replaced floor coverings and other minor stuff.
Had a border in the 2nd room.
Rented a while.
Glebe Point: 3 Bedroom, 1 bathroom, 1 garage, double brick single story end terrace. Bought 1992 $285k (borrowed $80k), Sold 1998 $468k. New kitchen & bathroom and opened the back up to the courtyard with bifolds.
Blakehurst: 3 bedroom, 3 bathroom, 1 garage double brick house. Bought 1998 $582k (borrowed $110k). Sold 2017 $1.75m. No major work but lots of repairs, painting and maintenance to what turned out to be a poorly done flip.
Rented a while
Erskineville: 3 bedroom, 2 bathroom, 2 car space townhouse. Bought 2018 $1.5m (no borrowings). Still there. Have since spent ~$235k on converting an unusable store room into a 4th bedroom, replacing both bathrooms & a kitchen, paint, carpet, Solar PV and 26kW of batteries. It's worth $2m so not a great investment in terms of opportunity cost but it's a great home.
That's 40 years of solid work and learning how to renovate and paying loans off as fast as possible. Lots of sacrifices made in the early years. I wouldn't like to be trying to get a start today
I see what you're saying, but no one could say with a straight face that $582k to $1.75m isn't absurd, regardless of renovation. I agree starting out now would be the pits, we are conservative and wish we'd gone much bigger earlier.
it really isn't absurd at all. that is 19 years so 6% a year increase. well below stocks or other investment avenues for the period. Even if it grew at only 3% (basically no growth due to inflation) it would still be over $1m after 19 years.
Agreed. CG per annum of 6% is below long run returns of growth assets.
The XAO only did 2.2x vs 3x for this property. However, the 3x would reduce for the maintenance and any improvement outlay. Also transaction costs much greater with property.
And XAO gross dividends most likely much higher than equivalent rent.
The All Ords Accumulation Index has returned around 10% over the very long run so would be higher than just 6% CG p.a. and very small equivalent rental yield.
However, property allows much greater leverage of equity.
However, property allows much greater leverage of equity.
Not as much as people think. NAB equity builder allows for up to 75% Loan to value ratio. The biggest difference is the loan duration where your repayments can only go up to 10-15 years instead of 30. The interest rates on equity builder is higher but its not as much as the greater long term average returns. Overall, it just works out to being able to borrow only about a third less than you would for property.
Not to mention no maintenance fees, insurance, council rates and dealing with tenants or agents.
Just buying at a simple average of any time in 2022 for VGS will see you up by 40%. Has property in Sydney even done 25% since 2022?
that's below average for Sydney for 19 years of compounded gains
no one could say with a straight face that $582k to $1.75m isn't absurd
It's less return over 19 years than what my investment portfolio has given. I bought the place to be a "family home" and not be at the mercy of landlords and it served that purpose well.
When I buy a PPOR I don't ask myself if it's a good investment, I ask myself "does this have the features and amenity that I want?"
Housing in Sydney is unaffordable for many due to lack of supply. Who is responsible for releasing land and making it available for development? What ever happened to decentralisation?
I wasn't implying your property was different to any other, more a comment on the entire market. Investments that involve the deployment of assets/labour to actively generate profit should provide better returns. If it gets close we're in trouble.
Thanks for sharing your experience showing the hard work (and time/compound interest) required to get there.
This is with hindsight (and others have managed it), did you consider keeping the older properties as investment properties instead of selling, that is trading up each time (I realise 2018 was a change in situation)? You would have saved a lot of transaction costs. Negative gearing was less important in the 80s/90s as rental yields were higher.
However, the biggie was that financial deregulation had only started to take place in the 70s/80s and getting a property loan was pretty hard in the 80s.
did you consider keeping the older properties as investment properties instead of selling
We seriously considered keeping the Glebe Point house and could have got a (relatively) huge loan but we had a one year old child and have always valued not having to worry about where the money was coming from. Not getting the maximum loan meant my wife could drop back to a 4 day week and we could have another child and take unpaid parental leave. Not having a big loan gave us options.
Thank you for sharing this.
Two posts and two comments in six years. One comment to his house painting post.
so what is the problem with this?
They must be very rich or earning $300K+ (together)…
First step is some chemistry knowledge. Second step is the purchase of an RV
You don't!!
People have the wrong assumption that buying a house is investment.
Sure, its price might increase as it might go down.
You don't know if 10y down the road changes to the suburb will drop the house prices meaning you lost money.
Nobody mentions that.
900K is only to buy the house, it does not include maintenance costs, fees and all when owning a house plus depreciation.
"I earn $150K and my wife $40K (part -time) a year. We were thinking to buy a house, applied for a loan and got approved for $900k only"
My earning is higher than you both but I would never buy a house here.
I have watched enough house inspection with "brand new houses" beyond disaster with repairs costing 6 figures.
How many years is the 900k loan for??
20 years??
30 years??
Spend those decades saving, investing the money while renting a place.
I rent too, I get it is annoying those mandatory inspections but if something breaks, the building fix it, zero cost to me.
If something breaks in your house, you either fix it yourself or pay for somebody to do it for you.
Everything comes from your pocket.
I never see buying house talks mentioning the extra costs, you will never spend only 1.5M, that is just the start.
Find out all the fees you have to pay excluding hidden maintenance, those 1.5M will become close to 2M assuming nothing will happen, assuming no more economy crashing, no more interest rate drama.
To start with, I'm not offering commentary on the wisdom of a debt:income ratio any higher than what your bank is offering you.
Secondly I'm assuming there are no plans for children in the foreseeable future, or that you have savings / parents etc to assist with repayments during any parental leave.
Having said that - banks assess your ability to repay at a rate 3% higher than the prevailing rate. Usually the rate used is the bank's standard variable, so if you can find a bank with a lower standard offering, you may be able to increase your borrowing. Also some banks won't apply the 3% buffer to a fixed rate loan of three or more years' duration, so that could be another avenue to explore.
And get rid of any other debt eg credit cards, personal loans, novated leases as all of these will affect your borrowing power as well.
All the same, a $900k loan would slot you into something worth $1.125m which would be a step on the ladder.
Not sure you'll even see this, as it looks like you've posted and ghosted.
$900k at 6% interest over 30 years is $65k a year. That's probably a little under half your take home income.
Stop worrying about keeping up with the Joneses and think about what you need. Do you really want to be a stressed mortgage statistic if you're out of work for a few months? I was able to build up a 12 month buffer in the offset within 18 months, if interest rates start coming down I'll be on easy street. All it took was living a little bit further out and I got significant financial security.
That seems about right not knowing how big your deposit is. A large deposit can help demonstrate to the bank your ability to save and service a loan. I’m not sure how old you are and if you have kids (presuming you do if wife is working part time) but say you’ve been working for 5years at that income level, you should have a $300k-500k deposit. It also depends if you have other debts like car loans etc.
You seem to be influenced by the media/banking/realestate narrative that tries to get young Australians to buy a super-expensive house in their 20s to keep prices high, and to keep banks making megaprofits from the billions of $ in interest Australians seem to want to pay them for the majority of their working life.
Try saving up for a decade until you have a decent deposit, then buy an affordable house within your budget, and you will be debt free within 3 years, as opposed to 30. It's a nice weight off your mind to be debt free. And the banks and real-estate agents can go poop themselves.
Also, if you think it's normal to buy a house in Sydney, you are very mistaken. It is one of the top 2 or top 3 most expensive cities in the world to buy a house. My girlfriend and I are successful, full-time workers with decent salaries and a lot of equity, but we could not buy a house in Sydney (except maybe a dilapidated undesirable house on the Western outskirts).
Have you tried inheriting 7+ figures?
Thanks all. It makes a lot of sense to me.
Really appreciate your input.
Do a rough calculation on the Interest alone,
ie. if 7% of $1M loan is $70K , then expect to pay around $70K every year for Interest while the $1M loan [Principal] is still expected to be returned back to the bank.
So, Principal & Interest repayment amount is higher than $70K per year, and that's a lot of money (after paying tax, food).
With that loan amount there is the expectation you have some money to put as a deposit, ideally 20% but u also may have to adjust your desired location in Sydney to one u can afford.m, which may not necessarily be Sydney.
Rent out 2 bedrooms to 10 immigrants
Why do you need a $1.5 million house?
I choose to borrow half what the bank was prepared to loan me you can pay the loan off considerably quicker.
What if you die? Or have a major accident? Where does that leave your partner and yourself?
First question i would ask is do you have to live in Sydney?
Next look for the cheapest houses closet commute to your work.
Less time commuting the better planning to have kid's? Look at shops and schools in that area.
I never wanted 1.5 mil home but I wanted something decent (livable) home. Obviously I need to abandon the idea of house and may be look for Townhouse or Duplex option. Thanks
Or perhaps an old apartment close to transport hub as a starting point. Commute will be less and you can get away without a car or just one car. You can always upgrade to bigger house when there is more cash coming in. I fell that taking a 900k loan for PPOR is major blunder from wealth building perspective. Also consider rent vesting.
You would be better off taking a loan you can afford to pay down faster than the minimum. Townhouses etc can be a good option. In the right area they will appreciate in value over time, especially if you are also able to renovate/improve them. New kitchens and bathrooms etc go a long way with buyers.
The only thing good about owning a cardboard house is that even as the cardboard crumbles and melts away with a single leak., At least there is the land value.
That 500 or 700 square meters of land is still there after 50 years.
With a Townhouse you got nothing but cardboard and strata fees and requiring permission to even make changes on your own property.
I owned a unit once. Never again.
Just sell your existing house that has gone up in value and use the proceeds toward a new place.
If it is your first house, you probably won’t be able to afford $1.5m.