RateCity.com.au
Advertisement

How much debt is too much?


Liron Nehmadi

Liron Nehmadi

1 min read

A home loan is considered to be too large when the monthly repayments exceed 30 per cent of your pre-tax income. Anything over this threshold is officially known as ‘mortgage stress’ – and for good reason – it can seriously affect your lifestyle and your actual stress levels.

The best way to avoid mortgage stress is by factoring in a sizeable buffer of at least 2 – 3 per cent. If this then tips you over into the mortgage stress category, then it’s likely you’re taking on too much debt.

If you’re wondering if this kind of buffer is really necessary, consider this: historically, the average interest rate is around 7 per cent, so the chances of your 30 year loan spending half of its time above this rate is entirely plausible – and that’s before you’ve even factored in any of life’s emergencies such as the loss of one income or the arrival of a new family member.


Contact a Broker

Enter your contact details to be put in touch with an Aussie expert, who will contact you as soon as possible to discuss your home loan quote.

First Name

Last Name

Phone Number

Postcode

Loan Purpose

By submitting this form, I accept RateCity's terms and conditions, privacy policy and Collection Statement for this service.

Yes, I'd like to get email updates from RateCity

Compare your product with the big 4 banks, or add more products to compare