That is very reasonable. In Australia, 35 year mortgages are normal, and 25-30 year mortgages were normal 20 years ago. Why would your household income need to be 1/4 of the cost of the house to make it work?
No, it does not. You forgot the interest. Let's call it 6%, close to the current US average.
The interest by itself comes to more than $1700 a month!
Paying $1700 per month, you'll never pay off $350k, even with a 1000 year mortgage.
To pay in 17 years, you'd need to pay $2741 (plus fees) per month. Most of that will be interest at first, but it tapers down. If you want to start out not paying mostly interest, you'll need to pay at least $3500 (plus fees) per month.
That said, mortgages aren't rocket science.
1. Assume at the end of the day you want the homeowner to be paying a stable monthly amount*.
2. In order to get there, you have {loan term}, {interest rate}, and {loan amount} as primary variables.
3. Assuming {loan term} and {interest rate} are constant (in a given mortgage market, at a given time), that leaves {loan amount} as the only variable.
So how do you get a constant monthly payment for a variety of {loan amounts}?
4. You add up all the interest that would be owed over the entire {loan term}, using {interest rate}, then divide each monthly payment into some proportion of {interest payment} and {principle payment}.
5. You also front-weight the interest payments, because at that time there's more outstanding total loan (versus at the end of the loan term, when only a little principle remains to be paid back).* *
Not super complicated. Yes, there's compound math, but conceptually simple.
* For some definition of stable, even if it readjusts on some schedule
* * Point in time interest pricing like this also makes future recalculation for over/underpayments easier, as you're essentially trued-up on interest payments at all times
Are they? I was under the impressions that 25-30 was normal now.
> $1700 per month pays off a $350k loan in 17 years, does it not?
Noooo. Have a play with this Australian mortgage calculator - https://www.commbank.com.au/digital/home-buying/calculator/h...
I think you might be in for a shock.
The example rate on the calculator is 5.35, about right when the base rate is 3.6 percent (though you can get lower), using that your $350k mortgage will take 40 years to pay off at $1700 per month. A $300k mortgage would take about 30 years. Or a $230k mortgage could be paid in your 17 years.
None of these loan amounts will get you anywhere close to a house in Australia today. You're looking around $1 million for the average house in most of the capital cities, with very few available under about the $650k mark.
This looks like a standard 30 year loan. If 100% of the 1700 went to principle and the was no interest then yeah, your 17 years works out, but then the bank makes no money.