How much of your income should you spend on a mortgage?

By Mark Rosanes

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.

What portion of your income should go to your mortgage?

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 0.28 = $1,919.68 (28% limit)

$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 income and expenditure calculator 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.

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:


Average mortgage size

New South Wales






South Australia


Western Australia




Australian Capital Territory


Northern Territory


National average


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:


Average monthly mortgage repayment

New South Wales






South Australia


Western Australia




Australian Capital Territory


Northern Territory


National average


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.

2. Re-evaluating your expenses

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.

4. Refinancing your loan.

Refinancing your mortgage can help you save money by changing your current loan terms to a lower interest rate. However, you may need to have a good credit history to do this.

5. Consolidating your debt.

If you have enough equity on your property, you can consolidate all your debt into a single large repayment instead of paying it off in several smaller chunks. This allows you to save on interest rates and simplify your finances.

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