The short version
- Repayments on $1,000,000 depend mostly on your rate and the loan term.
- A 20% deposit avoids lenders mortgage insurance and opens up lower rates.
- Small rate differences add up to thousands over the life of the loan.
What a $1,000,000 home loan costs
Your repayments depend on your rate and how long you take to repay. These examples are principal and interest, and leave out fees:
- At 5.5% a year: $6,141 a month over 25 years, $5,678 a month over 30 years.
- At 6% a year: $6,443 a month over 25 years, $5,996 a month over 30 years.
- At 6.5% a year: $6,752 a month over 25 years, $6,321 a month over 30 years.
Over 30 years at 6%, a $1,000,000 loan costs about $1,158,382 in interest on top of what you borrow.
Why small rate differences matter
On $1,000,000, every 0.10% off your rate saves about $64 a month, or $23,090 over 30 years. That's why it pays to compare, and to check your rate against new customer rates every year or two.
The deposit you'll need
To borrow $1,000,000 with a 20% deposit, the home would cost about $1,250,000, so you'd need about $250,000 saved, plus stamp duty and buying costs. With a smaller deposit, most lenders add lenders mortgage insurance, unless a government scheme or a guarantor covers it.
Can you borrow it?
Lenders check that you could still afford the repayments if rates rose 3%. At 6%, that means showing you can manage about $8,046 a month on a $1,000,000 loan, after your living costs and other debts.
Pros
- Repayments worked out on your amount, so you can see what each loan costs you.
- Variable loans let you pay extra, cutting years and interest off the loan.
- An offset account can cut the interest while keeping your savings to hand.
Cons
- A bigger loan means more interest if rates rise.
- Lenders test you at 3% above the rate, which can cap what you can borrow.
- Fees and lenders mortgage insurance add to the cost.
Alternatives
- Borrowing less with a bigger deposit, which cuts interest and may remove the insurance.
- A split loan, with part fixed and part variable.
- A mortgage broker, who can match you with lenders that suit your situation.
How to apply
Most people get pre-approval for a $1,000,000 home loan before they start making offers, then the full approval once they've found a home.
- Get your documents together. Payslips, two years of tax returns if you're self-employed, bank statements showing your savings, and details of your debts and credit limits.
- Get pre-approval. It tells you how much you can borrow and shows sellers you're serious. It usually lasts three to six months.
- Find the home and sign the contract. The lender then values the property before it gives full approval.
- Settle. Your lender pays the seller, and your repayments start about a month later.