BudBrain

We are presently house owners in the UK and when we took out our mortgage, it was something around 3.5 x the highest earner's salary..so £35,000 would get you £122,500.

How does it work in Australia... 3.5x ?

If we came over to Perth (and after renting for a while) we'd need to look at getting a mortgage but need to know how the mortgages work. We've heard from people on the ground that it can be as high as 9x (crazy) and others have said as long as you can pay it, they'll give you it (scary).

iamthecreaturefromuranus

Based on 'ability to pay'. 3.5 times salary type calculations don't really come into it. They see what other debts you have, make some basic guesses on other fixed costs and then say you can afford to pay 'X' per month and that means you can borrow 'Y'

BudBrain

Thanks. So would that be based on the highest earners salary or on both of ours?

I guess what I'm really trying to find out is if I was earning, for example, $55,000 and the wife $30,000 (with no other debts) - would we be able to get a mortgage around $400,000.

Any popular Australian mortgage calculators?

ABCDiamond

Never known anything as high as 9x income for a mortgage here.

Most banks have calculators, so you can get an idea of what they will lend, and they have been pretty accurate with any that I have been involved in.

This one from St George is one example: http://www.stgeorge.com.au/personal/...orrowing-power

They would lend up to $386,000 for a $70,000 income from a quick check that I did. That's about 5.5 times income.

A similar check on HSBC.co.uk gave a figure of 3.2 times income.

Basically as long as you can repay it, it should be OK, but factor in another 2% on interest rates for the future.

bcworld

It's not just debts, but any line of credit.

So if you have credit cards with $30k limit total, even if they have zero balance that would be deducted from the theoretical maximum they would lend.

Borrowing $400k on $85k income doesn't sound like a great idea.

ABCDiamond

Incomes of $55,000 + $30,000 would get you $515,000 or 6.05 times income.

Monthly repayments of $3,700 which is about 62% of net income leaving you $532 pw to live on.

ABCDiamond

If you show the bank that you pay credit card balances off in full each month, they can, and normally do, ignore them.

If they do choose to use that figure, you then offer to close that card and use the one they give you with the mortgage for the future. They have no problems with that.

BudBrain

Thanks all

I'd obviously not get anything that we couldn't afford. I'm just using examples as I prefer threads/discussions where people use actual figures.

What about haggling the purchase prices of a property - does it work the same as the UK? Using previous examples, could we in theory knock a $400,000 down to $386,000?

Sorry for all the stupid questions, just double checking things!

bcworld

Yes. Auction is a popular method of sale in some states though, no idea about WA.

ABCDiamond

Always negotiate a discount, it is expected.

Some of the data sites even show us the average discounts in some suburbs, for example in my area it is 6%.
So a $400k house on average would go for $376,000

The Perth region is currently the same as 6%, but Perth City is even higher, and Nedlands is 9%, so expect a $400k house to sell for $364,000.

biibi13

Sounds interesting. Would you please give me a hint where I can find these sites?

jimbo_d

haha try finding a house for sale in Nedlands for $400k that isn't a cardboard box

ABCDiamond

The free info can be found from Australian Property Monitors data

HelenTD

There are 2 x 1 bed units (one with study).

fish.01

People often confuse house price / salary with mortgage / salary. The average mortgage in oz is similar to UK.