I Want a $900,000 House: What Sized Loan Can I Get?

Imagine the moment you step into a $900,000 home that is uniquely yours. This isn’t just any property; it’s a dream turned into reality, a space where future memories will be made and life’s milestones will be celebrated. However, the path to owning such a prized asset involves navigating home loans. Today, we’re here to help you understand how to secure a home loan that turns your dream into a tangible reality. More importantly, we’ll try to answer your question: What value home loan can I get? 

Understanding Home Loan Basics

Securing a home loan for a $900,000 property means delving into the fundamentals of mortgage financing. A home loan is more than just borrowing money to buy a house; it’s a financial commitment that typically spans over 20-30 years. Some of the key elements of a mortgage or home loan include the principal amount (the money you borrow), the interest rate, the term of the loan and the repayment schedule.

One crucial aspect to understand is the loan structure. In Australia, many homeowners opt for fixed-rate mortgages, as they offer the stability of consistent repayments for a set period. These fixed terms usually range from one to five years. After this period, if the borrower doesn’t agree to a new fixed term and rate, the loan reverts to a standard variable rate, which can mean fluctuating repayments depending on interest rate changes. Understanding such nuances is vital in choosing a loan structure that aligns with your financial goals and lifestyle. 

Calculating Your Borrowing Power

Your borrowing power is often influenced by various factors, including your income, expenses, existing debts and credit history. Lenders use this information to assess your ability to repay the loan. Generally, the higher your income and lower your expenses and debts, the more you can borrow. However, it’s vital that you borrow within your means to ensure you can comfortably manage your repayments.

Want to calculate your borrowing power? You can use any home loan calculator available on many financial websites. These mortgage calculators consider your income, expenses & other financial commitments to provide an estimate of the amount you may be able to borrow. Remember, this is only an estimate, and the actual amount you can borrow may vary depending on the lender’s criteria.

“So, How Much Can I Borrow to Buy a $900,000 House?”

In the case of a $900,000 house, you’ll need to consider the deposit required. A deposit of at least 20% of the property’s value will mean you avoid having to pay thousands for lender’s mortgage insurance. A 20% deposit on a $900,000 home would be $180,000 in this scenario. With a 20% deposit, the required loan is $720,000 (for simplicity we have not included additional fees that would need to be factored in such as stamp duty and conveyancing). 

Let’s assume you’re an owner-occupier, repaying both the principal and interest over a 25-year loan term at an average variable interest rate of 6.60% per annum. Under these conditions, your monthly mortgage repayment would be approximately $4,907. To avoid mortgage stress, which is defined as spending more than 30% of your monthly income on loan repayments, you would need a post-tax monthly income of at least $16,357. So, if you want to buy a residential property worth $900,000, you need to have an annual after-tax income of about $196,284 to be able to afford a roughly $720,000 loan with repayments spread over a 25-year loan term.

However, remember that these figures can vary based on your financial situation and the specific terms of your loan. It’s also worth considering that if you’re part of a dual-income household, the combined earnings can contribute towards meeting these income requirements.

What Are the Factors Affecting Loan Amount?

Want to explore further the answer to the questions, “what value home loan can I get approved for?” or “what home loan can I get for my salary?” Here are the factors that can play a crucial role in determining the loan amount you can secure:

• Deposit Requirements

As mentioned, for a $900,000 home in Australia, a typical 20% deposit would amount to $180,000. This deposit size influences your loan-to-value ratio (LVR), which may affect the interest rates and terms lenders may offer. Lower LVRs often lead to more competitive rates.

• Income Requirements

Your income is a significant factor in determining your borrowing power. Lenders assess your ability to manage monthly repayments alongside your other financial commitments. Using our example above, if your monthly repayment would be around $4,907, you need an annual after-tax income of around $196,284 to get approved for a suitable loan and manage this particular repayment comfortably.

• Credit History and Financial Situation

Your credit score and overall financial situation are critical in the lender’s decision-making process. A strong credit history can enhance your borrowing power and possibly secure better loan terms.

• Employment Stability

Lenders also consider your employment status and history. Stable, long-term employment can positively impact your loan approval chances.

Additional Costs to Consider

When planning for a $900,000 home purchase, it’s essential to account for additional costs beyond the home loan. These may include:

• Stamp Duty: This government tax can be a significant expense, varying based on the property’s value and location.
• Legal and Conveyancing Fees: These are necessary for the legal transfer of property ownership.
• Building and Pest Inspections: These are essential for identifying potential issues with the property, which may help you negotiate the final sale price.
• Moving and Furnishing Costs: Often overlooked, these expenses can add up and should be factored into your overall budget.

Preparing for a Home Loan Application

To enhance your chances of a successful home loan application, consider the following steps:

1. Organise Your Finances: As early as now, check if your financial records are in order, including bank statements, tax returns and proof of income.
2. Boost Your Credit Score: Before applying for a home loan, consider paying down debts and avoiding new credit applications to boost your credit rating.
3. Save for a Larger Deposit: Always remember that a bigger deposit can improve your LVR and potentially help you secure better loan terms.
4. Explore Government Grants and Concessions: These government grants can provide financial assistance, especially for first-time homebuyers.

Discover the Deltos Finance Difference in Home Loans

Securing a home loan for a $900,000 property requires careful planning and consideration of various factors. But you don’t have to do all of that alone. Let our experienced Hobart mortgage brokers guide you and help crunch the numbers. 

Embark on your home loan journey with Deltos Finance, where personalised solutions and professional guidance come together to fulfil your unique home-buying needs. Our dedicated team is committed to providing you with tailored loan options and competitive rates, ensuring a seamless and affordable path to your dream home.

With our expert home loan brokers in Hobart and tailored solutions, achieving your dream of owning a $900,000 home becomes a more attainable reality. Contact us now to get started.