people discussing

A mortgage is a loan that helps you purchase a home. The amount you borrow is typically a percentage of the home’s value, and your monthly payments cover both the principal (the amount you borrow) and interest (the cost of borrowing the money).

How much of your income you should spend on a mortgage depends on a number of factors.

How Much of Your Income Should Go to Your Mortgage?

Your monthly mortgage payment should not exceed 28% of your monthly income. This will help you avoid financial stress and keep your mortgage payments affordable.

If you are forking over a large chunk of your monthly income towards your mortgage, you may be in danger of mortgage stress. This can be a worrying situation as it may mean you struggle to make ends meet or keep up with repayments, putting your home at risk. Keep an eye on your budget and make sure you aren't overstretching yourself financially.

A full-time working adult in Australia has an average weekly income of $1714. To find the median monthly income, we need to multiply this number by 4. The product will be multiplied by .28 to get the 28% limit. Then, to get the mortgage stress threshold, the product must be multiplied by .3.

Ideally, an average working Australian should allocate $1,920 to their monthly mortgage repayment and not pay more than $2,057 to avoid mortgage stress.

It's also worth noting that different people have different amounts of money available to them. Some people can afford to spend more than 30% of their income on their mortgage and still live comfortably, while others may not be able to.

What To Do When Experiencing Mortgage Stress

If you're currently experiencing mortgage stress, taking action is important. Here are some tips to help you:

  • Talk to Your Lender

Your lender is your best source of advice when it comes to managing your mortgage. They may be able to offer you different repayment options that can make your mortgage more affordable.

Some lenders also offer hardship programs that can help you if you're struggling to make your repayments. These programs can provide you with temporary relief from your repayments, or they may be able to extend the term of your loan.

  • Re-Evaluate Your Expenses

If you're struggling to make your mortgage repayments, it may be time to look at your overall budget and make some changes. Make a list of all your income and expenses, including your mortgage repayments and other debts.

Then, look at your expenses and see any areas where you can cut back. For example, you may be able to reduce your grocery budget or eliminate unnecessary expenses. Once you've cut back on your expenses, you can use that extra money to make extra mortgage repayments.

  • Switch to Interest-Only Payments

You may want to switch to interest-only payments. With interest-only payments, you'll only have to make repayments on your loan's interest. This can lower your monthly repayments, making it easier to make your mortgage repayments.

However, you should only switch to interest-only payments if you're confident that you'll be able to make the full mortgage repayments when the interest-only period ends. Otherwise, you may owe more money on your mortgage than you originally borrowed.

To Sum Up

There is no definitive answer to this question, as the amount of your mortgage you should spend depends on various factors, such as your income and the size of your house. Generally, it is advisable to borrow as much as you can afford to pay back while ensuring that you have enough money left over to cover other important expenses.

Work with the best mortgage brokers here at Wealthy You. We are an Australian mortgage company that has serviced Sydney for almost ten year. We provide various mortgage solutions to meet specific financial needs. Get in touch with us.