One of the most important things to consider when buying a house is how much mortgage you can reasonably afford to pay off. This is because knowing how much you can allocate to your monthly repayments very often spells the difference between living comfortably and struggling to make ends meet.

Expert opinion varies on the exact amount, but the consensus is you should have enough left over to meet other financial obligations after making a home loan payment. So, what percentage of your monthly income should you dedicate to your mortgage? Let’s take a closer look.

Many lenders and mortgage experts adhere to the 28% limit – meaning your monthly mortgage repayments should not exceed 28% of your gross monthly income or the amount you earn before taxes are deducted. This percentage also puts you below the mortgage stress threshold of 30%.

According to some experts, if you are spending more than 30% of your pre-tax monthly income on mortgage payments, then you may be at risk of mortgage stress.

To illustrate, the average weekly income of full-time working adults in Australia is \$1,714, according to last May’s seasonally adjusted figures from the Australian Bureau of Statistics (ABS). To get the median monthly income, we need to multiply this number by four – the number of weeks in a month - then multiply the product by .28 to get the 28% limit and .3 to find the mortgage stress threshold.

### \$1,714 x 4 x 0.28 = \$6,856 x 0.3 = \$2,056.80 (30% threshold)

Given these, an average working Australian should ideally allocate about \$1,920 to their monthly mortgage repayment and not pay more than \$2,057 to avoid falling into mortgage stress.

However, it is worth noting that each person’s financial situation is different and there are some who can allot more than 30% of their income to their monthly mortgage and still live comfortably.

Our home loan calculators can help you see exactly where you spend your money each month, so you can have an idea on how much you can dedicate to monthly loan repayments.

Buying a home or looking to refinance? The table below features home loans with some of the lowest interest rates on the market for owner occupiers.

Update resultsUpdate
LenderHome LoanInterest Rate Comparison Rate* Monthly Repayment Repayment type Rate Type Offset Redraw Ongoing Fees Upfront Fees LVR Lump Sum Repayment Additional Repayments Split Loan Option TagsFeaturesLinkCompare
6.04% p.a.
6.06% p.a.
\$2,408
Principal & Interest
Variable
\$0
\$530
90%
Featured 4.5 STAR CUSTOMER RATINGS
• Low rates for purchase and refinancing
• Simple online application process
• No fees, unlimited redraws, 0.10% offset
5.94% p.a.
5.95% p.a.
\$2,383
Principal & Interest
Variable
\$0
\$0
90%
5.95% p.a.
5.95% p.a.
\$2,385
Principal & Interest
Variable
\$0
\$0
90%
5.99% p.a.
5.90% p.a.
\$2,396
Principal & Interest
Variable
\$0
\$0
80%
• A low-rate variable home loan from a 100% online lender. Backed by the Commonwealth Bank.
Important Information and Comparison Rate Warning

Base criteria of: a \$400,000 loan amount, variable, fixed, principal and interest (P&I) home loans with an LVR (loan-to-value) ratio of at least 80%. However, the ‘Compare Home Loans’ table allows for calculations to be made on variables as selected and input by the user. Some products will be marked as promoted, featured or sponsored and may appear prominently in the tables regardless of their attributes. All products will list the LVR with the product and rate which are clearly published on the product provider’s website. Monthly repayments, once the base criteria are altered by the user, will be based on the selected products’ advertised rates and determined by the loan amount, repayment type, loan term and LVR as input by the user/you. *The Comparison rate is based on a \$150,000 loan over 25 years. Warning: this comparison rate is true only for this example and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate. Rates correct as of .

## How much does the average Australian spend on monthly mortgage?

According to ABS’ October lending indicator, the national average mortgage size is \$453,133. The amount can be higher or lower depending on where you live. Here is a state-by-state breakdown of new lending amounts based on ABS’ seasonally adjusted data:

 State/Territory Average mortgage size New South Wales \$585,821 Victoria \$438,803 Queensland \$401,371 South Australia \$345,423 Western Australia \$384,486 Tasmania \$313,937 Australian Capital Territory \$529,773 Northern Territory \$360,357 National average \$453,133

Source: ABS Lending Indicators (October 2020)

In terms of mortgage repayments, data from the 2016 Census of Housing and Population reveals that the average Australian pays \$1,755 each month. You can expect this number to change when the next census is held this August. Here’s the median monthly mortgage repayment per state and territory, according to the latest census:

 State/Territory Average monthly mortgage repayment New South Wales \$1,986 Victoria \$1,728 Queensland \$1,733 South Australia \$1,491 Western Australia \$1,993 Tasmania \$1,300 Australian Capital Territory \$2,058 Northern Territory \$2,167 National average \$1,755

Source: ABS 2016 Census of Housing and Population

## What should you do if you’re experiencing mortgage stress?

Just like your other financial obligations, you need to plan monthly mortgage repayments, so you do not fall behind. However, there are certain life-changing events – such as job loss, illness, death of a loved one, divorce, or birth of a child – that can affect your ability to manage your home loan payments.

If you are finding it difficult to meet your mortgage repayments without stretching your finances, there are several measures you can take. These include:

### 1. Talking to your lender

The first step you need to take when you are experiencing mortgage stress is to inform your lender about your situation. Your lender may be able to suggest ways on how to make your mortgage repayments manageable, including changing the terms of your loan or reducing payment amounts.

It is also a good idea to redraw your budget. Take a closer look at where you are spending your money and see where you can cut down. This can help prevent unnecessary spending.

### 3. Switching to interest-only payments

Paying only the interest portion of your loan over a certain period will allow you to adjust your finances until such time that you are able afford making monthly mortgage repayments. The typical length of an interest-only period is five years, but this can be extended depending on your agreement with your lender. One drawback, however, is you will end up paying more interest over the life of your loan. Additionally, your home’s equity will not increase during the interest-only period.