% of household income used to service mortgages

[alexlee]

From the recent articles it now costs 30% of household income to pay a mortgage. I assume that means 30% PRE-TAX income, since it's surely far more than 30% after tax income.

Why does the media use that measure? We don't get interest deductions on PPOR mortgages, so everything is paid from after tax. You'd think papers like the Daily Telegraph would use the % of after tax income figure just to make things look scarier.

Also, I always heard that people should spend no more than 30% of their income (I read it as after tax income) on rent. Does it refer to before or after tax income? If it's before tax, that would mean around 50% of AFTER tax? If people are spending 50% of their after tax on just rent, no wonder they can't save.....
Alex

 

[dave99]

I reckon it's the after tax income. So you get X amount in your bank account - 30% goes to mortgage. I never thought about whether it might be pre-tax.

- Dave99

 

[The Y-man]

Well don't worry about the mortgage - looks like credit cards are the bigger problem!!

http://www.theage.com.au/articles/2006/11/11/1162661949347.html

Cheers,

The Y-man

 

[Jase H]

Many lenders work on a max DSR of 30% of pretax salary, but this is to cover all debt servicing not just home loans (ie. CCs, car loans, store cards etc). I believe the article is actually refering to pretax as well. For whatever reason they all ways seem to do this.

cheers

jase

 

[quoll]

I agree, 30% of pretax income so we are looking at about 50% of after tax income.

Not much hope of saving, but some people still manage to save.

cheers
quoll