Buying a house in Sydney or Melbourne, if you pay the median price and get a big mortgage, could end up costing a lot more than you think.

Research by comparison website shows that a home-owner with a mortgage of at least $489,300 will end up paying $1 million over the duration of a 30-year loan, using the average variable interest rate of about 5.5 per cent.

Any property priced above $611,625 will end up costing the borrower $1 million, if the mortgage represents 80 per cent of the property’s value.

And if the property is in Sydney, where the median house price is $825,000, borrowers could hit the $1 million mark for their pile of bricks and mortar by just year 11 of the loan.

But, if they buy in Melbourne, where the median house price is $633,000, they won’t hit the $1 million mark until year 24, given a 20 per cent deposit and an interest rate of 5.5 per cent.

The median house price is the midway point of all the houses sold.

“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,”’s money expert, Michelle Hutchison, said on Monday.

“The danger lies with spending a lot more than necessary.”

Ms Hutchison said the value of a house would likely increase over the term of the 30-year loan – but that rise may not compensate for the amount a buyer ends up paying if they have a small deposit and haven’t shopped around for a good interest rate on their loan.

For example, an interest rate of 4.39 per cent – 1.11 percentage points below 5.5 per cent – would save $446 per month in repayments on a home loan of $660,000.


Price + Mortgage = Total cost

  • Sydney $825,000 + $660,000 = $1.349 million
  • Melbourne $633,000 + $506,400 = $1.035 million
  • Perth $530,000 + $424,000 = $866,673
  • Brisbane $475,000 + $380,000 = $776,735
  • Adelaide $421,000 + $336,800 = $688,433
  • There are numerous factors not considered here. That most people's houses are a tax free investment. That you have to live somewhere, an inherent living cost that must still be met. That most people pay their mortgages off way before the typical 30 year mortgage duration. That inflation reduces the value of the loan over time whilst typically increasing the value of the house. The greater your investment, the greater the potential returns. That interest has been at historical lows, which may not continue, but provide a comparatively cheap way to fund bigger loans.

  • Georgie paints a very optimistic picture, but one which ignores the reality for many home buyers.

    If one considers the costs for young people to buy into the myth of 'the great Australian dream', the costs are so high that increasing numbers cannot afford to own their own home. The cost of purchase and mortgage do not take into account the current relatively low interest rates, which will be higher over the life of the loan. Even at present, the mortgage costs nearly double the initial cost of purchase!

    For those who believe the marketing by building companies, which is designed to lure thousands into the domestic building industry each year, the reality of the building experience is hidden. The domestic building industry is unregulated and effectively lawless, so many cowboys have been licensed and there is a total lack of consumer protection. However, few owners are aware of the facts and do not realize the risks, the high probability of being severely damaged or that attempting to build a ‘new house’ is such a perilous pursuit. Dreams are shattered, but far worse, owners risk losing all their savings and for so many bankruptcy, homelessness and ruined lives are the penalties.

  • We need to be building new cities in more appropriate places: not trying to build higher on the limited space the current cities have.

  • For those seeking alternatives it may be time to look closure at equity solutions where supply meets demand more equitably and the money/capital markets not so influential

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