Jump to content
CrozierFamily

Mortgage Salary Multiple in Oz

Recommended Posts

Hi Folks

 

Sorry, another question!

 

I have been working from an assumption that the upper limit for a salary multiple on mortgage lending would be around 4X salary. That is what it is here in UK, can someone confirm for me if that is the case?

 

I found a post from 2008 on this, but cant find any recent updates and the websites are classically unclear!

 

Cheers,

 

Andrew

Share this post


Link to post
Share on other sites

I think that might be about right, however I always look at estimated repayments when I consider what to borrow, not salary multiples.

 

If I borrowed 4X salary the repayments are way, way over what I would like to pay, in fact would be half my take home pay. I like this quick calculator, it always defaults to 7.5% interest which is a touch high so make sur eyou change that if you have a look.

 

http://www.yourmortgage.com.au/calculators/repay_basic/

Share this post


Link to post
Share on other sites
I think that might be about right, however I always look at estimated repayments when I consider what to borrow, not salary multiples.

 

If I borrowed 4X salary the repayments are way, way over what I would like to pay, in fact would be half my take home pay. I like this quick calculator, it always defaults to 7.5% interest which is a touch high so make sur eyou change that if you have a look.

 

http://www.yourmortgage.com.au/calculators/repay_basic/

 

Thanks, I dont necessarily want to borrow that much, but it is good to know what your max limit is. I appreciate the link.

Share this post


Link to post
Share on other sites

my mum works as a home loan officer she says it doesn't work like that anymore. they do this affordability thing and look at your outgoings etc. so a young couple with no kids for example could loan a lot more than a couple with two kids. what they would loan seems crazy to me I think a return to 3.5 x income would bring house prices down

Share this post


Link to post
Share on other sites

it doesnt work that way here in oz, they look at your earnings, outgoings etc then see what deposit you have and what risk you are, if you are high risk you pay mortgage insurance to the bank a one off payment to cover the bank if you mess up

pop into a bank and get more info

if you earn enough its about what you can afford to pay, this hopefully stops people buying houses they cant afford to buy

i could buy a house for $798000 but i wouldnt we are looking at $350K which the bank is happy with and can see we can afford it

there are also of ways you can mix and match your mortgage so you can over pay without being charged

hope this is ok

Share this post


Link to post
Share on other sites

Above two posts are correct. They look at the income available to service the loan once existing commitments are met.

 

Two people could be on the same income - the one with five kids, a car loan and a maxed-out credit card will be offered far less than the single person with no dependents or current debt.

Share this post


Link to post
Share on other sites

Some lenders will also lend more than others, but at not as attractive a rate. You may also find that overtime, part time jobs etc are generally not considered.


Nearly there! Don't drop the ball now guys! Vaccines are weeks away. Stay safe!

 

Share this post


Link to post
Share on other sites
my mum works as a home loan officer she says it doesn't work like that anymore. they do this affordability thing and look at your outgoings etc. so a young couple with no kids for example could loan a lot more than a couple with two kids. what they would loan seems crazy to me I think a return to 3.5 x income would bring house prices down

 

Beware of the banks version of affordability. They take out your current outgoings, like loans etc, subtract the amount that relates to the 'poverty' index and the rest of your pay is avaliable for a 30 year loan. Some mortgage brokers will go even further, larging up your income etc. Very much like the UK was a few short years ago. If Aus banks applied real afordability or strict loan ratios like they used to some years ago, house prices would fall through the floor and actualy become afrodable.

Share this post


Link to post
Share on other sites
Guest JK2510
Some lenders will also lend more than others, but at not as attractive a rate. You may also find that overtime, part time jobs etc are generally not considered.

Is the above true? A part time job and regular overtime aren't considered...I think that's written out a large amount of people if it is.

Share this post


Link to post
Share on other sites
Is the above true? A part time job and regular overtime aren't considered...I think that's written out a large amount of people if it is.

 

Dunno about overtime but shift pay is. If they work on your last 10 pay checks as they did with ours, I can't see them delving too deeply into what the pay consists of. Things may have changed though since we applied.


See my art here: https://kevindickinsonfineartphot.smugmug.com/

Copies free to PIO members. PM me for details.

Share this post


Link to post
Share on other sites

my colleague who earns 50k pa on a temporariy contract, borrowed 440k from the bank, so that's about 9x, and he owes 60k hex (from Uni). Aparantly that's fine as it's an investment and will get rent, which won't actually cover the interest payments, but that's fine too as the government will give him tax back on his loss making investment. As long as he stays living with his parents, the bank will let him buy as many investment properties as he wants. However, I've heard there's no debt problem here, and the banks have done so well over their foreign counterparts because the don't do high risk lending.


READ FIRST: please note that my posts are my own personal opinions based on my experiences. These are MY OPINIONS pure and simple, NOT a statement of fact.

Share this post


Link to post
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now

×