What you need for a $900,000 home in Australia

A $900,000 home will get you pretty far in most places in Australia.

The average house price in Sydney (according to Corelogic’s August 2023 Home Value Index) is $1,333,985. The next highest is Canberra at $839,507. So, aiming at this high price point is certainly in the ballpark for a pretty good property.

Let’s dive into this as there are a couple of things you’ll need when going for a home loan at this price level. This includes aspects such as the deposit needed for a $900,000 home and the income required to manage monthly repayments.

How much do you need to buy a $900,000 home loan?

When you take out a home loan, you’ll need to also make sure you’ve got a deposit. The typical home loan deposit is 20% of the property's purchase price, but there are instances where you can contribute as little as 5-10%. 

In addition to your initial deposit, you will probably need to cover several upfront provider fees and government charges, such as:

• Loan application fees 
• Settlement fees 
• Conveyancing fees 
• Property valuation fees 
• Stamp duty (unless you qualify for an exemption)

These fees can add up to hundreds of dollars, but you may be eligible for a stamp duty waiver if your state offers one so make sure to double check.

Beyond your deposit and the various fees tied to property purchase, a home loan provider will also consider your borrowing power. Different lenders may have varying criteria for calculating your borrowing power, so make sure to shop around and compare home loans if you don’t get a positive response initially.

What does a deposit for a $900,000 loan look like?

In Australia, buying a home usually requires a 20% deposit, meaning a $900,000 home deposit will amount to $180,000. This would put you at a loan-to-value ratio (LVR) of 80%. The benefit of this is that you can usually find a lot of competitive rates with a higher deposit/lower LVR.

If you don't have a 20% deposit but can afford a 10% (or even a 5%) one, consider exploring low-deposit home loans. A 10% deposit will require you to save $90,000, while a 5% deposit reduces the amount to $45,000.

Remember, however, that you'll likely need to take out Lenders Mortgage Insurance (LMI), which could increase your overall costs and expose you to higher interest rates due to your elevated LVR.

If you're short of a 20% deposit, there are some strategies to avoid paying for LMI and qualifying for higher rates. These include:

• Finding a guarantor
• Using a cash gift as part of your deposit
• Applying for a first home owner grant.

How long does it take to save a 20% deposit for a $900,000 home?  

Saving up for a $180,000 deposit can take a while depending on your income. If, for example, you save $1,500 per month, it would take you 10 years. 

Here’s how much you would need to save:

• If you save $3,000 per month, you’ll accumulate your $180,000 deposit in 5 years. 
• If you save $6,000 per month, you’ll accumulate your $180,000 deposit in 2.5 years. 
• If you manage to save $15,000 per month, you’ll accumulate your $180,000 deposit in just 1 year.

This is assuming you’re just stashing your cash under the mattress. With a high interest savings account, you could potentially increase your deposit faster as the effects of compound interest accelerate your savings. 

It can also be a good idea to find out how much you can realistically be saving by creating a budget. Tools like Mozo’s budget calculator can give you an idea of what your financial situation looks like and how much you could be saving. 

How much income do you need to buy a $900,000 home? 

So, how much would you need to be earning for a $900,000 home? Assuming you’ve saved up a 20% deposit, you’ll need to get a $720,000 loan. Let’s assume you’re an owner-occupier, paying principal and interest, with a loan term of 25 years at the average variable interest rate of 6.60% p.a. (according to the Mozo database).

Using Mozo’s mortgage repayment calculator, your monthly instalment would be $4,907. However, considering 'mortgage stress' (i.e. spending over 30% of your monthly income on repayments), you’d need to earn at least $16,357 after tax each month to comfortably manage your financial commitments.

Calculated as a yearly salary, those looking to purchase a $900,000 house would need to have an after-tax income of $196,284 per year. Or, of course, you might be half of a dual income household or have the chance to partner with someone else on your potential purchase. 

If you’re prepared to buy, then Mozo’s handy borrowing calculator could help you gauge the size of the loan and its repayments. Already sorted that out? If you’re ready to compare home loans, then have a look at some of the featured products below.