Aussies now face $1m price tag for homes

Aussies now face $1m price tag for homes

Posted on Monday, January 12 2015 at 12:38 PM

The Australian dream of homeownership carries a
$1 million price tag for many, following new research by comparison website finder.com.au.

The research found that Australians with a mortgage of at
least $489,300 will spend   $1 million over the life of a 30-year loan (using the
average variable interest rate of about 5.5 per cent).

If this mortgage size is 80 per cent of the property’s value,
any property priced from $611,625 will end up costing borrowers $1 million.

Michelle Hutchison, Money Expert at finder.com.au, says many
borrowers are being stung by this slow-burning hole in their hip pocket.

“When borrowers look at how much they can afford to repay for
a home loan, they might not look down the track to how much they end up
spending. The danger lies with spending a lot more than necessary.”

“While it’s likely that your home will increase in value over
a 30-year loan term, it might not compensate the cost of a home loan as the
money you end up spending can be greatly increased if you have a small deposit
and don’t shop around for a good value deal,” she says.

Sydney tops the list for the most expensive median house
price of $825,000 according to figures by CoreLogic RP Data. For this price
tag, borrowers will hit the $1 million mark by year 11, based on the average
variable rate of about 5.5 per cent with a 20 per cent deposit, which would
mean a loan size of $660,000.

For the
median-priced house in Melbourne of $633,000, a mortgage of $506,400 (with a 20
per cent deposit) would cost borrowers $1.035 million over 30 years – hitting
the $1 million mark by year 24.

“This
research was based on the average variable rate of about 5.5 per cent but
borrowers need to remember that there’s a big difference between what lenders
are offering, which can mean bigger costs for a home if you’re not careful,”
Hutchison says.

“Take
advantage of the online tools and comparisons of different home loans to help
you find the best value deals.”

Click here
for API’s raft of calculators and tools.

Total cost to buy a median-priced house
with a 20% deposit

Source: ranked by highest median house prices, price
figures from CoreLogic RP Data, calculations and analysis by finder.com.au, based on average variable home loan
interest rate of 5.5%, 30-year loan term and 20% deposit

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