Image courtesy of @mcdonaldjoneshomes.

To help you, as an investor or potential homeowner, determine the returns on your next property purchase, here are things to look at other than, of course, interest rates:

RENT TO MORTGAGE REPAYMENTS

Compare the cost of rent to mortgage repayments in the home. The overall cost of homeownership tends to be higher than renting even if your mortgage payment is lower than the rent, due to added expenses such as homeowners insurance and council rates.

MORTGAGE REPAYMENTS TO WAGES

Compare mortgage repayments to your wages. Recent research shows that Australians on average put a 37% proportion of their monthly income towards their home loan repayments (Real Estate Institute of Australia (REIA)), even though many lenders and mortgage experts adhere to the 28% limit.

PROPERTY PRICES TO WAGES

Compare property prices to your wages to ensure you can save for the deposit. In saying that, property prices rose seven times faster than wages over the past year (Australian Bureau of Statistics). And when a lender looks at your mortgage application, it generally assumes about 30% of your gross income can be used to make loan repayments.

RENTAL YIELD TO PROPERTY PRICE

Rental yield compared to the property price. When the rental yield ratio goes down, investors will not buy property as they are not getting a return that is high enough.
To calculate the gross rental yield of a property, divide the annual rental income by the property value and multiply that figure by 100.

Several factors need to be considered when choosing the right home loan. Work closely with our expert team to determine the most appropriate financial solution.