How much should you be paying on your mortgage in 2018?

Jul 17, 2018 | Finance, Loans

According to some analysts, house prices are on the decline and it’s a pretty confident bet that most of us are putting aside a decent chunk of our dosh towards mortgage home loan repayments.

That’s why it’s important to know where you stand after the bank takes their portion of your repayment.

According to the most recent housing data from the Australian Bureau of Statistics, every major capitol, other than Hobart and Canberra, have seen declines in housing values. Sydney’s market has dropped by 1.2%, and Melbourne residential prices have gone down 0.9%. When looking at what we’re paying, it’s most likely looking at the asset you’re funding depreciating in value for the first time in a while, or ever.

Mortgage vs Salary

So now let’s have a gander at the Domain House Price Report, and the ABS’s mortgage data, and compare some medians:

CityApartmentHouseMortgageMonthly RepaymentMonthly salary
Sydney$740,041 (-0.5%)$1.150,357 (-2.6%)$469,400$2241$7119
Melbourne$505,861 (+0.7%)$914,518 (+0.1%)$412,700$1970$6820
Brisbane$380,196 (-4.3%)$557,214 (-0.6%)$349,100$1667$6864
Adelaide$316,851 (no change)$533,525 (+0.8%)$304,500$1454$6522
Perth$351,048 (-3.7%)$553,486 (-2.0%)$356,200$1701$7891
Darwin$308,999 (-15.9%)$520,074 (-7.5%)$325,200$1553$7831
Canberra$411,004 (-2.2%)$727,914 (+0.8%)$388,500$1855$7953
Hobart$325,944 (-5.7%)$450,349 (+2.7%)$263,900$1260$6178

Repayments based on a nominal interest rate of 4% over 30 years for a property you’ll live in.

A lot of owners will be borrowing at levels in excess of the medians by a fair margin. In the assumption that there was a 20% deposit on a property and the purchase was at median prices, it is evident that most cases the average mortgage suggests a deposit of over 30%. So, repayments could be larger for lots more owners than the median represents.

In the more recent ABS data it is evident for weekly salaries, that on averages and medians, mortgage repayments sit between a fifth and a third of monthly pay-packets.

Although this information suggests people are not undergoing mortgage stress, this is not the reality.

Even though property prices aren’t gaining at the same rate we viewed two to three years ago, a large portion of buyers are borrowing at levels that are 80% or further of the median property price. In Sydney, that may mean borrowing three or four times the median mortgage.

For a dual full-time income household, that may be achievable but it’s not always possible for a household to have all the parents working full-time.

So how much you should be paying at this point? A few dollars over the minimum payment can even make a difference in the long term, even splitting monthly to fortnightly, can make a positive adjustment.Simply cutting your monthly payments to fortnightly you can essentially make more payments and therefore pay off more per year… Reducing your loan time of its course.

Think about other upcoming money outgoings and potential outgoings when calculating your borrowing power. What happens if appliances need replacing? Or a partner loses their employment… Do you have any funds left over after you’ve made your purchase?

In summation, it’s worth thinking about the risks and coming up with a plan to making sure you’re safe in all situations.

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