Can You Actually Afford Your Current Home with Your Current Income?

oztite on 18/03/2017 - 00:31
Last edited 18/03/2017 - 11:09 by 1 other user

Someone pointed out that the majority of home owners in Syd and Melb actually can't afford their own home at the current market value with their current take home income. This applies to the majority of people apart from the few that recently purchased.

I am not talking about whether or not you own your home outright, size of your current mortgage, equity available for you to buy a house from your other property investment, parental support available etc, but rather, with your current income, and your current living expense, can you afford to take out a loan to buy the house you currently live in at its current market value if you have to start from scratch?

Median house price in Toorak, Vic is $4 million. Median household income for the suburb is $180,000. Yes most of them reduce their taxable income heavily via various clever ways, but there is still a substantial discrepancy.

Is this a problem?

Poll Options

• 41
  Yes I can afford my home at its current market price with my current income
• 24
  No way! I got in early, otherwise I can't afford to live in my current home
• 14
  I am renting...
• 9
  Homeless, so technically yes I can afford it

• 

  trustnoone on 18/03/2017 - 00:50

  +1

  Kind of making a comment here just so I can remember to come back later as I'm interested in other peoples answers.

  I find this interesting because I was looking at houses around $400,000 just to see if I could ever afford it. Using this calculator: https://www.nab.com.au/personal/loans/home-loans/home-loan-c… it comes to $462 a week, I earn about $950 a week though this doesn't take into account water, electricity, council rates, possible strata, maintenance.

  On the flip side, rent in Sydney can get up to $500 a week so might be worth looking into.

  This also means a loan for 30 years at 4.4 percent variable. So I'd have to get my current income minimum until I'm 55 ish (though I haven't touched any super because I don't really have any yet lol)

  What I find further interesting is that at 400k it might be alright for me, but finding a place for a family (so 4 people) in Sydney, I'd be looking at way more then 400k if I wanted to be anywhere near the major areas. (I'm not a massive place hunter though, so I could be wrong in a lot of this, just been hitting up searches last night)

• 

  [Deactivated] on 18/03/2017 - 01:51

  +3

  i live in the gutter

  • 

    PJC on 18/03/2017 - 03:22

    +3

    The only way is up … excluding basements.

  • 

    Braintrain1000 on 24/03/2017 - 21:31

    Atleast you don't have to do end of lease cleaning. I am renting though.

• 

  CyberMurning on 18/03/2017 - 08:54

  +3

  in the pool, 10 says they can but i doubt it.

  this is not if you can afford your current mortgage, but can you afford to re-buy your house NOW.
  Dont forget to factor in your current life style expenses. plus, bank now is very strict. they will calculate your borrowing power based on 7-8% interest rate, or more, not based on the current rate you pay 3-4%.
  and each $1 from your credit card limit, will reduce your borrowing power by more than $3 (yes it is not proportional)

  also the 20% deposit need to be considered as well at this current house prices,
  $800,000 house means $160k deposit plus costs.
  how on earth 25 years old person can have that much laying around?

  the best way to find out:
  call your current bank lender, say you want to do refinance to a different product within the same bank and take some equity out. they will re-assess everything again and tell you how much you can borrow now.

  • 

    tomleonhart on 18/03/2017 - 15:21

    Yep. We just that. We can still afford my own home at current market + another loan up to 1 mil.

• 

  BensonP on 18/03/2017 - 09:50

  +1

  I'm a yes.

  Bought a townhouse in Melbourne for $420k
  I had 20% deposit, so no Lenders Insurance.
  My repayments are $1650ish a month, and my wage is about $4500 a month after tax.

  I just noticed you said 'current price', which the bank has valued conservatively at $450k, but my answer is still yes.

  • 

    onetwothreefour on 18/03/2017 - 20:51

    I'm nearly the same as this, my house that I bought last year was $410k and I had a 20% deposit. It's a 3 bedroom place. I earn a bit more every month but I also have 3 kids to look after.

    When I take into account my mortgage payments, rates, insurance, extra travel cost to work it works out to be about the same as I was paying for renting a 2 bed unit in inner west Sydney.

• 

  poboy on 18/03/2017 - 11:06

  +1

  I bought about 8-10 years ago. Was very stretched at the time, but managed. I acutely remember the media commentators predicting that property was indeed in a bubble and that prices would have to go down. They didn't. 12 months later and the value of my house appreciated more than my wage of that year. I would not have been able to purchase my property 12 months after I did. Couple this with about 7 interest rate increases in 2 years and it was tough.

  Although I saved extremely hard for 4 years (didn't buy a car or go on overseas holidays), I count myself as lucky to get a property before the huge upsurge in prices.

  From a social policy perspective, I don't agree with negative gearing, but if I had the capital I would definitely use it - reducing your taxable income while enjoying a growth asset is a no brainer.

• 

  cainen on 27/03/2017 - 16:17

  I bought an apartment a bit under 3 years ago for 475k. It's currently valued at 560k. I could afford the repayments easily at the current value but wouldn't have the deposit to buy it.