Summer is when there is heightened activity in the property markets and many buyers are taking their leap into property ownership. However, this time of year also brings many other expenses and Christmas spending takes a toll on the household budget.
If you’re looking to buy a home this summer, you’re probably wondering how much of your take-home income should you be allocating to your mortgage?
For buyers trying to understand affordability before entering the market, working with a residential buyers agent can help clarify budget, borrowing limits, suburb choice, and the type of property that may suit your financial position.
How Much of Your Income Should Go Towards Your Mortgage?
A widely accepted benchmark for mortgage repayments is about 30% of your household income. When it comes to financial stability, the higher the percentage above 30%, the more financial pressures and mortgage stress can start to limit your spending.
Mortgage stress will occur when you start to feel limited for spending on necessities like groceries and unexpected health expenses.
Take this 30% as a guide, but not a set rule. There are other factors that will contribute to affordability, such as location, household size, and lifestyle, which will determine how much you can comfortably afford.
What Is the Average Australian Paying on Their Mortgage?
With rising interest rates and inflation, we are at a point where mortgage repayments are at an all-time high.
The latest Real Estate Institute of Australia Housing Affordability Report, from September 2024, revealed that Australians are now typically spending 48%, or almost half, of their household income on their mortgage repayments.
This equates to an Australian average monthly home loan repayment of $3,926 for the average home loan, which is $636,209.
When we drill down by location, NSW raises the bar with an average of $4,760 per month for mortgage repayments and an average home loan of $771,422, followed by VIC at $3,806 per month for an average home loan of $616,877, and third is QLD homeowners who are paying $3,727 per month for an average home loan of $603,988.
A first home buyers agent Melbourne can help buyers assess whether their target suburbs and property types are realistic when mortgage repayments, lifestyle costs, and future financial flexibility are all considered.
How Do Mortgage Repayments Impact Day-to-Day Life?
To understand why mortgage repayments and the percentage of income is so important, we must consider how this impacts daily life.
According to the Australian Bureau of Statistics (ABS), the average monthly costs for Australian households will be:
Groceries
The average Australian household spends approximately $600 to $1,000 per month on groceries, depending on the household size and dietary preferences.
Entertainment and Leisure
Australians spend around $200 to $500 per month on entertainment, which includes dining out, streaming services, movies, and recreational activities. This category often sees cutbacks when households experience financial strain.
Utilities and Transportation
- Utilities, including electricity, gas, and water: $300–$500 per month
- Transportation, including fuel and public transport: $400–$800 per month
Savings and Miscellaneous Costs
Households are encouraged to allocate 20% of their income to savings or emergency funds, which is roughly $1,667 per month for a household earning $100,000 annually.
How Do You Know if You Are at Risk of Mortgage Stress?
The main signs of mortgage stress will appear over time and can include:
- Falling behind on mortgage repayments
- Relying on credit cards or loans for daily expenses
- Neglecting bills or other financial obligations
- Experiencing high levels of anxiety about finances
Mortgage stress is a common challenge for Australian households, but it can be managed with proactive planning and smart financial habits.
By keeping your mortgage repayments within 30% of your gross income, understanding your household budget, and implementing strategies to avoid or mitigate stress, you can protect your financial health and secure long-term stability.
How Can Buyers Avoid Mortgage Stress?
Set a Realistic Household Budget
Knowing your budget and upcoming expenses can really combat overspending.
Your detailed budget should include your mortgage repayments, fixed costs such as utilities and insurance, and variable costs such as entertainment and groceries.
By tracking where you spend your money, you will be able to identify where you can cut back.
Know Your Repayments
Speak to a mortgage broker to understand all your borrowing options because borrowing within your means is crucial.
Your loan amount should be comfortable to repay and allow you to maintain financial flexibility even if interest rates rise, you have unexpected expenses, or your income decreases.
A buyers agent first home buyer can help new buyers avoid overcommitting by matching the property search with a realistic budget, rather than chasing homes that may create financial pressure later.
Put Money Aside in an Emergency Fund
Putting aside at least three to six months’ worth of living expenses can help you overcome any unexpected financial challenges, such as job loss or medical emergencies.
Refinance Your Mortgage
If interest rates fall or your credit profile improves, consider refinancing your mortgage to secure a lower interest rate or extend your loan term to reduce monthly repayments.
This can also be achieved if you’ve been with the same lender for many years and have been a good customer.
Increase Your Income
If you are unable to reduce expenses, you might be able to explore increasing your income.
Investigate whether you can create any additional income streams, such as freelance work, a part-time job, or renting out a spare room.
Seek Professional Advice
A financial advisor or mortgage broker can help you restructure your debts, negotiate with lenders, and identify cost-saving opportunities.
Cut Back on Non-Essential Expenses
Reduce spending on entertainment, dining out, and luxury items. This can free up cash for mortgage repayments without compromising your essential needs.
Consider your subscriptions like Netflix, Stan, Foxtel, and similar services, and consider what you could do without.
Utilise the Benefits of Offset Accounts
An offset account linked to your mortgage can reduce the amount of interest you pay, potentially saving you thousands over the loan term.
Final Thoughts
Buying a home is exciting, but the mortgage needs to fit your real life, not just your borrowing capacity on paper. The 30% benchmark is a useful guide, but your actual comfort level will depend on your income, lifestyle, household expenses, savings buffer, and future plans.
Working with a residential buyers agent can help buyers approach the property search with clearer expectations, stronger budgeting discipline, and a better understanding of what is genuinely affordable.
Make sure you head over to our YouTube channel by clicking here to discover more educational insights to level up your property investing including our latest video: Australian Property Market 2025 Forecast.
Disclaimer:
Aus Property Professionals Pty Ltd retains the copyright in relation to all the information contained on its website and in this guide. This guide, and any content provided in addition, or linked to resources, is general information only and not investment advice. As everyone’s individual situation is different, we advise individuals to always seek advice from relevant professionals such as legal, financial, accounting, and investing experts.
The intention of this guide is to be used for general information purposes only, in addition to your personal research and due diligence. We do not take any responsibility for any actions taken as a result of this guide as any actions should always be taken with consultation with relevant professionals who take individual circumstances to account.
Past performance doesn’t guarantee future results.
We have compiled the information contained in this guide from online resources, our research, and consultations, and we cannot guarantee the complete accuracy of this information, and we will always reference the resources where the data and information was derived.
