How Much Income Do You Need to Buy a $700,000 Home?

Take a $700,000 purchase with a 20% deposit ($140,000) plus around $30,000 in stamp duty and costs (varies by state and first home buyer status). You need around $170,000 in cash plus a loan of $560,000. Lenders typically allow you to borrow around 5 to 6 times your gross annual income, depending on dependents, debts, and current rates. To service a $560,000 loan, a single applicant generally needs: • $95,000 to $105,000 gross income at the top end of borrowing capacity (6x) • $130,000 to $150,000 gross income at a more comfortable level (4x to 4.5x) For a couple, combined gross income of around $130,000 with no kids, or $150,000 with one or two children, will usually service this loan comfortably with most lenders. These numbers shift with interest rates. When the RBA cash rate moves, serviceability buffers move with it.

Australian lenders are required by APRA to assess loans at a buffered rate, not the actual rate you will pay. Since November 2021, APRA has mandated a serviceability buffer of at least 3.0% above the actual rate. So if your rate is 6.10%, the lender tests whether you can repay at 9.10%. Lenders also use the Household Expenditure Measure (HEM) or the higher of HEM and your declared expenses. HEM is a benchmark of minimum reasonable expenses by household size and income, calculated by the Melbourne Institute. For a couple with no children earning around $150,000 combined, HEM is typically in the range of $40,000 to $50,000 per year before any debts. Add a car loan, child care, or private school fees and your assessable surplus drops fast. Existing debts hurt borrowing capacity disproportionately. A $20,000 credit card limit (even with $0 owing) typically reduces borrowing capacity by around $80,000 to $100,000. A $600 per month car loan can cut $60,000 to $80,000 from your maximum.

Lenders include: • Base salary and regular allowances (typically 100%) • Overtime: usually 80% if regular and ongoing for 6 to 12+ months, sometimes 100% in essential service roles (nursing, police, paramedics) • Commission and bonuses: usually 80% averaged over two years • Self-employed net profit: averaged over the last two tax returns (see our self-employed Q&A) • Rental income: typically 75% to 80% of gross rent (lenders shade for vacancy and costs) • Government payments (Family Tax Benefit, Carer's Payment): policy varies; some lenders accept up to retirement age of the youngest dependent • Investment income (dividends, distributions): usually 80% averaged over two years Not included or heavily shaded: cash income, one-off bonuses, lump-sum settlements, and most casual work under six months tenure. Getting your full income picture in front of a lender that uses it generously is one of the highest-leverage things a broker does.

If you cannot quite get to $130,000+ as a single, the income required can change with these levers: • Larger deposit: a 25% to 30% deposit reduces the loan size and the required income • Cheaper area or smaller property: every $50,000 reduction in price cuts the loan by around $40,000 • Clearing credit card limits and buy-now-pay-later before applying • Choosing a lender with a more generous HEM or assessment policy (varies between lenders by 10% to 20% on capacity for the same applicant) • Adding a guarantor (typically a parent) to support either deposit or serviceability • First Home Guarantee (5% deposit, no LMI), which means less savings required, although the loan size increases • Joint applicants where one earns more than the other, since lenders sum gross income The $130,000 to $150,000 figure is a useful benchmark, but every applicant has a different policy fit and the gap between your worst and best lender outcome is often $100,000+ in capacity.

This is general information only, not personal credit advice. Your actual options depend on your full financial picture, including your income, deposit, credit profile, and the specific loan structure you need. Speak with a licensed broker for advice tailored to your situation.