The great Australian dream could see your home loan jump by $274,000

Key points:

• 1 in 3 (31%) of Australians say they'd only ever buy a house, of which 2 in 3 require a backyard.
• Houses are up to 32% more expensive than units, according to CoreLogic's Home Value Index (HVI).
• Larger house values require a larger deposit, bigger monthly repayments, and accrue more interest over time.

Australians are obsessed with houses, despite units being up to 32% cheaper and offering potential interest savings of up to $274,405 on their home loans .

According to new research from Mozo, almost a third of Aussies (31%) say they will only ever buy a house, two-thirds of which say a backyard is essential.

But houses cost up to 32% more than units, according to CoreLogic’s Home Value Index (HVI), with median dwelling values of $997,352 and $679,849, respectively.

Mozo personal finance expert Rachel Wastell says 'Aussie dream' chasers might need to shift their expectations, given the steep contrast in prices.

“The great Australian dream of owning a house may now need to shift to owning a unit if buyers want to borrow less and save more," says Rachel Wastell, personal finance expert at Mozo.

"With the property market continuing to heat up, prospective buyers should be considering whether paying the additional cost that comes with a house is justified.”

These additional costs go beyond the initial purchase price, affecting deposit size , mortgage repayments and how much interest is paid over time.

House deposits dwarf unit deposits across the country

Nationally, a 20% deposit on a house is $41,470 more than for a unit, according to median dwelling values from CoreLogic.

A 20% deposit on a median-priced house in Australia is $41,470 more than for a unit, according to the HVI, while capital city prices push the gap in deposit size to $63,500. For regional buyers, the difference in deposit size is markedly less, at $17,199.

However, a 20% deposit is still in six-figure territory, regardless of property type or location.

Houses vs Units: Deposit Costs

Buyers opting for houses could pay $1,761 more each month and $274,405 over the life of their loan

Aside from spending more time and money saving up for a larger deposit, buyers who opt for a house over a unit in Australia’s capital cities could face paying an extra $1,761 per month, and $274,405 more in interest over 25 years, based on the average variable home loan interest rate of 6.79% p.a.†

Even in regional areas, where there’s not such a pronounced price difference, borrowers could save $74,322 in interest over 25 years, and cut their monthly repayments down by $477.

Houses vs Units: Interest & Repayment Costs

“The data reveals that units are not only more affordable upfront but they can also offer ongoing savings, which is an important consideration for anyone looking to buy their first home,” says Wastell.

“If you’re worried you won’t be able to afford your monthly repayments, or meet serviceability requirements, looking at units could give you a bigger shortlist of affordable properties.

“For those buyers who want to get on the property ladder that don’t need a house, opting for a unit could mean a lot less stress and make a lot more sense.”

It’s also important to have a competitive home loan rate in your corner. While the average variable rate in the Mozo database is 6.79% p.a.†, there are plenty of other home loans with interest rates that start with a ‘5’, that could help shave even more off your mortgage bill.

So, make sure you compare home loans and make use of cost-crunching tools, like a mortgage repayment calculator .

†Based on 25-year terms, Owner Occupier Principal & Interest, LVR <80%. average variable rate taken from mozo database as of 4 september 2024.