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Comment by lastofthemojito | Hacker News Reader

I've heard 3x income as a rule of thumb for how much house one can afford, but it looks like that's never been widely followed. It also doesn't make a whole heck of a lot of sense as interest rates have varied so widely - a better rule of thumb might be a ratio between the total amount of payments over the life of a mortgage and one's income.

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The 3x income rule is usually mentioned by your loan officer, and your real estate agent. They will present you with houses costing 3x your income as a baseline of what you can afford.

That's funny, you need to earn 250000/year to be able to afford _something_ in Vancouver by following that rule.

or 600000/year for a starter home

IMO the ratio depends entirely on your age. It makes a lot of sense for someone in their 20s to go for a 4x ratio (with caveats, such as fixed mortgage rates). It makes no sense at all for someone in their 60s.

Agree. From experience, people look into how much they would pay monthly and their income.

This then begs the question: what will happen once rates go up even a bit, and houses suddenly require a 50% larger monthly payment.

Most mortgages haves fixed rates

Of course. But buyers still need to be able to afford houses they purchase. With higher rates that might not be true.

Does it matter? From an individual's perspective, if you can make the monthly payment then all is well. Sure, the market may tank but all that does is effect your ability to move.

New mortgages will need that extra 50% driving home values down due to future homebuyers having less "monthly" purchasing power.

Over what time period? I think I’m America you can get a 30 year fixed rate mortgage. In Canada, 5 years is the most you can get even if the amortization period is 25-30 years.

In the US, 10, 15, 20, or 30 years in my experience

That rule does not work in Australia, Canada or the UK :D

Median salary is about 80k AUD in Western Australia. Median house price is 840k.

Even with 2 full time salaries of 80k your maximum would be 480k.

3x income for your debt load or for the overall home cost? Either way it seems like it wouldn't really directly translate to a % of income as monthly payment.

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