Where can I afford to buy a house?
In the property market, location trumps all. The closer a house is nestled to a major city, the higher its value is likely to be, and the more a buyer will have to borrow on their home loan. Even moreso if there is a coastal escape nearby or a motorway that connects the suburb to the city centre.
Saving for a deposit and tending to the monthly mortgage repayments is a major consideration for those looking to buy a home. If a buyer’s repayments exceed 30% of their income, this is considered a recipe for mortgage stress.
Add to that the higher cost of living in some locations, and other financial commitments having to share the spotlight, and it becomes clear that understanding where you can afford to purchase a house is an important part of the buying process – because it’s ultimately the location that will cost.
Once you determine your borrowing power and how much your monthly home loan repayments will be – which you can do through Your Mortgage’s borrowing power mortgage calculator – you will then want to scout the top suburbs across the country in which you can afford to buy a property based on these results.
‘Where Can I Afford to Buy’ calculator can help you on this investigative hunt, cutting through some of the market noise to give you a rough guideline of the locations in each state that will most likely suit your finances.
How does the "Where can I afford to buy" calculator work?
The calculator filters through thousands of suburbs from around the country to give you a list of the ones in which house prices best suit what you can afford.
In order to gather your results, the calculator asks you a few questions; how much are you able to put towards the monthly mortgage repayment? What suburb has grabbed your interest the most? And what kilometre radius are you willing to expand your search into?
However, it’s important to note that although the calculator is a great starting point, it doesn’t take into account a number of variables that can occur when taking out a home loan; such as the standard variable interest rate taking a rising, a change of financial circumstance occurring, additional mortgage repayments being made, and any fluctuations that can happen with the market.
In saying this, the suburbs provided by the calculator are only estimated results and based solely on a fixed monthly repayment. A home buyer should conduct further independent research to determine their borrowing power and where they can afford to buy a house, best done with the engagement of a mortgage broker or financial adviser.
Australia’s most desired neighbourhoods
Whilst buying competition in major cities has been no less dense than their rising populations, a change is a-foot and new suburbs have started to top buyer’s most wanted lists.
Realestate.com.au recently revealed the top 10 most sought-after suburbs across New South Wales, Victoria and South Australia, with home buyers increasingly giving once lulled suburbs a newfound urban potential.
Middle Park in Victoria has seen an influx of interest, as has Millswood, Crafers West, Stirling, Aldgate, and Belair of South Australia
The New South Wales front-runners were Killarney Heights, Allambie Heights, Collaroy Plateau, and Birchgrove.
Hobart has, however, emerged as the most popular city to buy in, and according to the latest Global Residential Cities Index by Knight Frank, the capital tracked 9.6% growth over the past 12 months, taking it to 17th place. Canberra accounted for 1.8% growth in 100th place, followed by Adelaide, Brisbane, and Perth. Last on the list was Sydney, with prices having plummeted by 7.8%.
But with newer suburbs already grazing headlines, first-time home buyers might want to be one stride ahead of the competition. In saying this, what areas are going to be in-demand tomorrow?
Up and coming neighbourhoods
Your Investment Property has recently assessed the market performance of suburbs countrywide, to give buyers and investors exclusive insight into 132 high-growth hot-spots.
And what do the places that have made the list predominately have in common? Other than tracking strong rental yield and good house values, they’re situated close to a city, have local amenities, and are near schools and medical facilities.
A buyer can purchase a house minutes’ drive from the beach, such as in the Tasmanian suburb of Acton, where the median house price comes in at $180k, or Western Australia’s Cable Beach that has a median house price of $445k.
There are also options for those wanting to remain close to a capital city. For instance, the Victorian suburb of Carlton is only a 10-minute commute to Melbourne CBD, and the median unit price comes in at just over $417k.
Take a look at the most sought-after suburbs in Australia to see what attracts you
How much of a difference does location make in mortgage repayments?
When purchasing a property, there is more to consider than just your income, utility bills and credit card debts. These all help in determining your borrowing power, and in-turn where you can afford to buy, but just as important is how much it will cost to live in your chosen suburb, city or state.
The cost of living will make up a significant portion of your expenses, and not having enough at the end of the month to cover a mortgage repayment after these expenses leave your account can raise a red flag.
So whilst the median house price of a suburb may be perceived as affordable when it’s held-up beside your borrowing power and monthly repayment threshold, the associated costs can be countered by the cost of living; such as groceries, transport, memberships and going out.
In saying this, it’s important for the buyer to conduct thorough research on how much they expect to spend towards living in their chosen location.
Things to consider when choosing an area to buy
In addition to taking into account the cost of living in a specific region, there are other important factors to consider when deciding on where to buy a house, and some of these include:
- Whether you will need to change jobs. If so, what type of work opportunities are available in the immediate or surrounding region? And how will a new job affect your income?
- The renovation costs, especially if purchasing a fixer-upper. Will you be able to afford this after signing into the property and taking out a home loan?
- How the market is performing in the chosen area, and how it is predicted to perform in the future. Will your property increase in value and allow you to build in equity?
- The type of lifestyle your chosen suburb or region will provide. Is there a strong, friendly community presence? Is it popular for families? Are there enough local amenities and transport options available, and in easy reach?
How can the right lender get me into the neighbourhood I want?
The best place to start when applying for a home loan and deciding on a location to buy, is to team with an experienced and qualified mortgage broker or financial adviser, who will be able to provide advice and help you get into the suburb you want.
Mortgage brokers are not only exposed to a number of competitive home loan products on the market from a handful of lenders, but can on some occasions, leverage their industry contacts to create an exclusive mortgage deal just for you – it never hurts to ask!
However, whilst a professional will help you to the best of their ability, being given the green light to buy in a certain region’s market will ultimately depend on whether your finances will be able to provide the deposit and tend to the entire life of the home loan.
A buyer being able to remain level-headed and compromise on their dream location may turn out better for them in the long run. And with cities only expanding, what may be a quiet town to begin with, could flourish into a booming market rewarding to a second-time buyer.
The locations provided as results by the calculator are to be taken as a reference or guide only. Results only rely on your chosen suburb pre-sets, and your inputted monthly mortgage repayment; they don’t factor in that interest rates can alter or fluctuate throughout the entire life of the home loan, that your financial circumstances can change, and that the suburb’s market can also experience changes.
It should also be noted that results do not indicate the likelihood of a buyer being able to secure a property in a specific location nor do they act as a determiner. A formal assessment should be independently sourced, advisably to be done with a financial adviser or mortgage broker, and results depend on the information provided to the lender as part of their home loan application process.