Over the past few years, many people have become homeowners, or have moved into the 2nd (or 3rd etc) home. Most of those people bought with the expectation that the price of their home would keep rising.
Some of those people have become disappointed (or possibly will be soon) as the price of their home stagnates or even (for some) declines…
For those who are getting ready to buy a house in Adelaide, here’s a tip:
- Lenders calculate loan affordability based on a percentage of income, less current loan instalments and credit card limits.
- The South Australian Government says households should pay no more than 30% of their income in mortgage repayments
- Adelaide’s median house price is just over $400,000 (depending on whose figures you use); an 80% loan at say 7% would have payments of around $2,500 a month.
- Using the government’s 30% ratio, a household would need to be earning at least $100,000 a year – if they have no other debt.
- A household earning $100,000 will pay around $20,000 or more in income tax. So after tax and mortgage they would have about $50,000 ($960/week) for everything else
Part 2 of this post will appear shortly…