What is the average mortgage on a million-dollar home?

Nowadays, a million-dollar plus price tag on a property is not uncommon - especially if you live in capital cities like Sydney or Melbourne. 

For Australian home buyers looking to snatch up one of these properties, you may be wondering what the average mortgage could cost you on a million-dollar home? Ultimately, it depends on your deposit size, as well as the current interest rate environment. 

The cost of a million dollar mortgage

The average mortgage repayments on a seven-figure home will depend on the amount of money you’ve saved for a deposit, as well as the interest rate offered on the home loan. 

RateCity has crunched the numbers on different deposit sizes and different interest rates, to demonstrate what the average 25-year mortgage repayments would be for a million-dollar home. 

With a 20% deposit, the mortgage size would be $800,000, with a 10% deposit the mortgage size would be $900,000. 

Repayments on $1 million property, with 20% deposit ($800,000 loan)

Repayments on $1 million property with 10% deposit ($900,000 loan)

Note: Hypothetical example for demonstrative purposes. Based on a 25-year loan term for $800,000 home loans and $900,000 home loans with different interest rates. Does not factor in fees or rate fluctuations. 

What affects the cost of a million-dollar property mortgage?

As you can see, the greater a deposit you have, the smaller your home loan, and the easier your mortgage repayments might be. However, the interest rate plays a significant role in the cost of the mortgage. A larger home loan with a lower interest rate can still cost borrowers less than a smaller home loan with a higher interest rate. 

Lenders recommend saving a deposit of at least 20% as this indicates a strong level of financial responsibility and savings. It also helps you to avoid paying costly Lenders Mortgage Insurance (LMI), and to qualify for more competitive interest rates.  

You may be able to gain approval for a home loan on a million-dollar property with a deposit of 10-15%. However, with a debt this significant, you will need to showcase you can comfortably service the repayments through a high, stable income. You will also need to pay LMI, which, on a million-dollar home, could be tens of thousands of dollars. 

Further, the current interest rate market will also impact the average mortgage on a million-dollar home. Interest rates are influenced by several factors, most significantly being the Reserve Bank of Australia’s (RBA) cash rate. When the RBA lifts or cuts the cash rate, this can directly affect the interest rate of a variable rate mortgage. 

Put simply, if rates are rising, the average mortgage for a million-dollar home will be much higher than if rates are falling. And if you applied for a seven-figure property with a small deposit, rising interest rates could push your mortgage repayments into mortgage stress territory.

The amount you’ll end up paying each month can also depend on how competitive your lender’s offer is. This is why it’s so important to shop around for a competitive interest rate, especially if you’re applying for a larger home loan.

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