This guide is designed to help you understand your monthly repayments and other important costs if you’re taking out a $400,000 home loan. We’ll walk you through key details such as interest rates, the deposit you’ll need, and any additional expenses to keep in mind so that you can feel confident about your decision.
How Much Will You Pay Per Month On A $400K Home Loan?
A mortgage repayment calculator is a helpful tool for estimating your monthly repayments based on various interest rates and loan terms. It can provide a clear picture of how different factors, such as interest rate and loan term, affect your repayments.
Here’s an estimated breakdown of monthly repayments for a $400,000 principal-and-interest home loan at different interest rates and loan terms.
| Loan Term (Years) | 5% Interest Rate ($) | 6% Interest Rate ($) | 7% interest rate ($) |
|---|---|---|---|
| 15 | 3163 | 3375 | 3595 |
| 20 | 2640 | 2866 | 3101 |
| 25 | 2338 | 2577 | 2827 |
| 30 | 2147 | 2398 | 2661 |
These figures are rough estimates and can vary depending on your specific loan, taxes, insurance, and other related fees.
How Much Deposit Do You Need For A $400K Home Loan?
For a $400,000 home loan, most lenders require a 20% deposit, which would amount to $80,000. However, if you meet certain conditions, some lenders may allow you to borrow up to 95% of the property value, requiring a smaller deposit.
For instance, if you purchase a property worth $500,000, a $400,000 loan would require an $80,000 deposit, which is 20% of the property price. Some lenders offer the option to borrow up to 105% with a guarantor, eliminating the need for a deposit in certain cases.
Please remember that your deposit doesn’t cover additional costs like stamp duty and other fees.
Additional Homebuying Costs To Consider
In addition to your deposit, you’ll need to account for about 5% of the property value to cover additional costs such as:
- Stamp duty
- Mortgage registration fees
- Lenders mortgage insurance (if applicable)
- For a $400,000 loan, this could add an extra $20,000 in costs.
How Much Do You Need To Earn For A $400K Mortgage?
To afford a $400,000 mortgage, your gross annual income should typically fall around $80,000, assuming you don’t have other major debts. This estimate takes the following factors into account:
- Debt-to-income ratio (DTI): Lenders prefer a DTI below 6, meaning your total debt should not exceed six times your annual income.
- Deposit size: A larger deposit lowers your loan amount and makes it easier to qualify for a loan.
- Interest rates: Lower interest rates decrease monthly repayments and improve affordability.
- Get Pre-Approval: This involves a financial and credit check by the lender to determine how much it is willing to lend you. Pre-approval allows you to confidently shop for homes within your budget.
- Formal Loan Application: Once you’ve found a home and your offer has been accepted, submit a formal loan application to your lender.
- Property Valuation: The lender will assess the value of the property to ensure it justifies the loan amount.
- Loan Approval: Finalise the terms of the loan with your lender and make sure everything is in place.
- Settlement: After the loan is approved, sign the final documents, pay any closing costs, and take possession of your new home.
- Interest rates: A lower rate means smaller repayments, while a higher rate results in larger ones.
- Loan term: Longer loan terms lead to lower monthly repayments, but you’ll pay more in interest over time.
- Repayment type: Interest-only loan terms reduce your monthly costs while they last, but result in paying more interest over the loan term.
- Negotiate A Lower Rate: Sometimes, asking your current lender for a lower rate helps reduce your repayment amount.
- Switch To Interest-Only Repayments: This can temporarily lower your repayments, though it increases the total interest you pay over time.
- Consider A Fixed Rate: Fixing your interest rate can provide stability and predictability, helping you plan your finances more effectively.
This range is a general estimate, and your actual earnings requirement may vary depending on your financial circumstances.
What Process Is Involved In Getting A $400K Home Loan?
Here’s an overview of the steps involved in securing a $400,000 mortgage:
Explore our complete guide to the home loan application process for a thorough, step-by-step breakdown of each stage.
What Factors Affect Monthly Repayments?
Several factors will affect your monthly repayments:
How Can I Manage And Reduce Repayments?
There are several ways to manage or reduce your monthly repayments on a $400,000 mortgage. Think about refinancing to benefit from lower interest rates other lenders offer. Making this change could lower your monthly repayments.
If you’d rather stick with your current lender, there are still plenty of options to consider:
For more details on these alternatives, see our guide, Can I Lower My Mortgage Repayments Without Refinancing?
Get Expert Help With Your $400K Mortgage
If the mortgage process feels overwhelming, don’t worry – you’re in good company. And our Home Loan Experts, with an average of seven years of experience, are eager to help you find the right loan for your needs. We’ll support you at every step, from securing better rates to taking care of the paperwork, making the entire process smoother and stress-free.
Call us at 1300 889 743 or complete our free online assessment today!
