But what’s different today compared to the past, is that home loan interest rates are super low, and that’s seeing loan repayments take up a far smaller proportion of household income.
It’s a big plus for “home loan serviceability” – the term lenders use to measure how much of your income is used to pay off your home loan.
Back in 2008 for instance, property prices were typically lower than they are now. Yet a home buyer using a 20% deposit to buy their place could expect their home loan repayments to gobble up almost half (48%) their regular income.
These days, the cash rate is among the lowest ever seen in Australia, and that’s driving a big improvement in loan serviceability.
As a guide, a home buyer using a 20% deposit to buy a home today, will, on average, only need to use 36% of their income for home loan repayments. That’s less than home owners were paying 13 years ago back in 2005! And it means more money left over for you to simply enjoy life.
What does it mean for you?
The price you pay for your home matters but it’s only one part of the picture.
It is also important to weigh up your loan serviceability. After all, you need to be able to comfortably manage your loan repayments. And the fact is, home loan serviceability is vastly better today than it was over a decade ago.
Goes to show that now could be a smart time to buy.
Talk to your Aussie Broker to understand how much of your income may need to go towards paying off your new home.
You may also be interested in Why use an Aussie Broker? Hear it from a first home buyer,
6 steps to make the switch from renter to home owner, and Getting a home loan in 2018: A guide from Aussie’s CEO