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It's the most common question on Australian finance forums: "Is my mortgage too much for my income?" Whether you're borrowing $400,000 on a single income or $900,000 as a couple, the anxiety is the same - am I stretching too far?The answer depends on your income, expenses, lifest
The general guideline is no more than 30% of gross household income, but this varies significantly by income level. Under 28% is comfortable with room for rate rises. Between 28–35% is manageable but tight. Above 35% is considered mortgage stress. The most important factor is what you have LEFT after the mortgage payment, not the percentage itself.
On a $100,000 single salary, a $500k loan at current rates (6.2%) means repayments of approximately $3,065/month - about 50% of your take-home pay. This is above the stress threshold and leaves limited buffer. It can work if you have substantial savings in offset, but most financial advisers would consider this stretched.
Banks assess your ability to repay at the current interest rate PLUS a 3% buffer. So if the rate is 6.2%, they test at 9.2%. They also use HEM (Household Expenditure Measure) benchmarks for minimum living costs. Both tests must be passed for approval.
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