Here’s How Much it Costs to Own Your Own Home

The great Australian construction boom continues to be funded by households as home loans rocket along at the fastest pace in 12 years.

The latest Bureau of Statistics data shows the average home loan across Australia stood at $371,200 in August, which is $8,300 per cent more than a year ago.

And the debt being taken out by first home buyers is a similarly substantial amount, with the average loan size up $5,400 to $346,600.

It’s a big wad of cash, and the very real burden that first home buyers across the country carry to work with them every day. If you’re part of that crowd, good on you for growing up. If not, do you reckon you could you handle the load?

Let’s take a look at the monthly repayments on that average first home buyers’ loan to see whether you’re in a position to make the repayments.

How much it costs each month

Record low interest rates mean the banks are offering some extraordinarily low rate loans at the moment, which certainly makes things seem more affordable.

However, given rates will move higher in time, you’ll want to factor in an interest rate buffer of at least two per cent to account for higher repayments in the future.

Perusing the home loan comparison sites, the lowest rate home loan is about four per cent right now, so we’ll use an interest rate of six per cent to account for that buffer.

Running the numbers through one of MoneySmart’s marvellous mortgage calculators, the repayments on the current average first home buyers’ loan lasting 25 years at six per cent will be $2,233 per month.

Of course this doesn’t account for the deposit you’ll need to save, or any mortgage insurance you might need to cover, but is still a handy health check for your finances to see if you could service the average first home buyers’ loan.

If you’d prefer a more sobering reality check, the same loan on the average Australian capital city house price of $580,000 will be $3,737 per month.

If you’d like to play with the numbers or get an idea of how much you might be able to afford to borrow, check out the calculators at MoneySmart.gov.au. And if you’re in the market for advice on building your wealth, check out these three tips for investing in your twenties.