A shorter commute can change your daily routine, and it can also change the size of your home loan. Before you start searching, it helps to weigh the time you gain against the extra borrowing it might take.
This article is for anyone deciding whether a home nearer to work is worth the price tag. We will look at the upsides, the trade-offs, and how to test the numbers before you commit.
What Are the Benefits of Buying a Home Closer to Work?
The main benefits are more time, lower travel costs and less daily wear and tear. You may also have more flexibility to be home for family, exercise or study.
Those gains are real, but they only help if the numbers work. Fuel, tolls, parking, public transport fares and vehicle running costs vary from person to person. Add up what your commute costs you now, because that figure is what you are trading against any higher repayments.
What Are the Downsides of Living Near Your Workplace?
The main downsides are that homes near job hubs can cost more, you may get less space for your money, and your job could change. If you move for a workplace and then switch employers, the location may no longer suit you.
Some areas near work can also be busier or noisier. Visit at different times of day, including peak hour and weekends, before you make an offer. A home that looks ideal on a quiet Sunday may feel different on a Tuesday morning.
How Much Extra Can a Closer Home Cost You in Repayments?
A higher loan amount raises your repayments in a predictable way, so you can test the trade-off before you buy. The figures below use an illustrative rate of 6.75% p.a. on a 30-year principal and interest loan. They are not a current offer.
Consider a buyer who has found two homes. The one further out needs a $600,000 loan. The one near work needs $650,000. At the illustrative rate, repayments on the first are about $3,892 a month. On the second they are about $4,216 a month, which is roughly $324 more.
The buyer then adds up their current commute costs. If travel would drop by more than $324 a month, the closer home may pay for itself in cash terms, before counting the time saved. If it would drop by less, the decision comes down to how much they value those extra hours. Either way, they now have a number to base the choice on rather than a feeling. Your own result will depend on your deposit, your lender and your loan features. A calculator is a good way to run your own scenarios when calculating home loan repayments.
Will a Closer Home Affect Your Borrowing Capacity?
Yes, a higher-priced home needs a larger loan, and your borrowing capacity sets the ceiling on what a lender may offer. Your borrowing capacity mainly depends on your income, debts, living expenses and deposit. The property's location and type can also affect what a lender will lend against it, for example through postcode or high-density policies that cap the LVR. Check the specific property with your lender or broker. A higher-priced home also needs a larger loan, so it must fit within your limit.
If you are unsure where your limit sits, you can check your borrowing capacity before you inspect properties. A home loan pre-approval can also show you a likely price range, although it is not a final offer and can change if your circumstances change or once the specific property is assessed. If this is your first purchase, our page for first home buyers covers the extra points to consider.
Which Home Loan Features Suit a Buyer Moving Closer to Work?
The right features depend on how settled you are in your job and how much flexibility you want. Each option has a trade-off, so it is worth matching them to your plans.
- Offset account: Money in a linked offset account reduces the interest charged on your loan, and you can still access your savings. The trade-off is that some loans with offsets carry higher fees or rates, so check the total cost.
- Variable rate: Repayments can fall or rise as rates move, and these loans often allow extra repayments. The risk is that your repayments can increase.
- Fixed rate: Fixed repayments give certainty for a set period. The trade-off is that extra repayments are often limited and you may face break costs if you leave early.
- Split rate: You fix part of the loan and leave the rest variable. It balances certainty and flexibility, but you carry the downsides of both parts.
If you think you might move again for work, ask about how each option handles selling, switching or paying the loan out early. You can explore the range of home loan options we can compare from lenders across Australia.
What If Your Work Location Changes After You Buy?
If your work moves, you can keep the home, sell it, or review your loan to suit the new situation. Your loan does not have to stay the same for its whole term.
A refinancing review can show whether a different loan structure would suit your new circumstances. Before you buy, it is worth thinking about how long you would realistically stay, because selling and buying again involves costs that can outweigh the benefit of a short stay. Also consider how readily the home could be rented out or sold if your plans change.
Is Buying Closer to Work the Right Move for You?
It is the right move if the time and travel savings outweigh the extra loan cost and you are confident you will stay in the job for a while. Run the repayment numbers, check your borrowing capacity and test the area at different times of day.
If you would like help comparing loan structures for a home near your workplace, call one of our team or book an appointment at a time that works for you through our booking page. We can look at your numbers, explain the trade-offs and help you decide what suits you.
Frequently Asked Questions
Is it worth buying a home closer to work?
It can be if the savings in time and travel costs outweigh the extra loan repayments. Compare your current commute costs with the repayment difference before you decide.
How much more could repayments be on a bigger loan?
As an illustration at 6.75% p.a. over 30 years, a $650,000 loan costs about $324 a month more than a $600,000 loan. Your actual figures will depend on your lender, deposit and loan features.
Does a closer home change my borrowing capacity?
Your borrowing capacity mainly depends on your income, debts, living expenses and deposit. The property's location and type can also affect what a lender will lend against it, for example through postcode or high-density policies that cap the LVR. A higher-priced home also needs a larger loan, so it must fit within your limit. Check the specific property with your lender or broker.
Which home loan features suit a buyer who might move for work again?
An offset account and a variable rate can offer flexibility, while a fixed rate gives repayment certainty. Each has trade-offs such as fees, rate changes or break costs, so ask about them before choosing.
