How to Buy A Home Without Becoming A Mortgage Slave

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Housing in Australia is expensive.

If you scroll social media or read the news for too long, you’ll come away thinking there are only two options.

1- Somehow buy a house and chain yourself to a giant seven figure mortgage

2- Stay renting forever and give up on the idea of owning anything

Both are pretty depressing.  But I strongly disagree with this narrative.

My view is pretty simple.  You can buy a home, and you can build wealth and freedom.  But you can’t do it while refusing to make tradeoffs.

In this article, I want to walk through a few things:

— Why housing ended up where it is
— What “mortgage slavery” looks like
— The levers you can use to bring the cost down
— My thoughts on starter homes and long-term renting
— A special section for singles, because your path is different

By the end, I want you to see that this game is still very winnable – just not by doing what everyone else does.

Let’s start with how we got here.

How we got here (the short version)

There’s no question that property prices have become more expensive as a multiple of income – as measured by a median full-time worker.

You’ll see endless arguments about why this happened, but there are a few big things that explain a lot of it.

For most of the last century, the typical household had one income.  One person worked, one person stayed home.  House prices were loosely anchored to what a single wage could support.

Then we shifted to two incomes.  Suddenly, households could borrow a lot more, and that extra spending power got baked into prices.  At an auction, two decent wages will always beat one.

On top of that, you’ve got the following…

— Interest rates falling a long way from where they were in the 80s and 90s (borrowing capacity exploded further)

— Banks became comfortable lending higher LVRs (90–95%, whereas 50% was more the norm back in the 1950s/60s)

Combine that with our cultural obsession with property…

Every time Australians have more income, more borrowing power, or more wealth, a big chunk of this ends up being funnelled into housing.

Then there’s policy and culture.  Zoning rules, NIMBY attitudes, slow councils, drip-feeding developers, tax perks, cash grants, and our own desire for larger, fancier homes in the same handful of suburbs near the CBD and the water.

So there’s no single boogeyman to blame.  We effectively did this to ourselves as a society.  This is the gameboard we’re left with today.  So let’s talk about how you’re going to play it.  And to do that smartly, we should define the outcome we want, and what we’re trying to avoid.

What you don’t want… is mortgage slavery

I would define mortgage slavery as when a scary chunk of your take-home pay is going towards loan repayments and/or property ownership costs.

It’s basically when there’s nothing leftover each month.  When you don’t have a nice chunk of spare cashflow to also invest, build up a nice buffer, or pay down the loan more aggressively.  And if you actually get nervous every time there’s an RBA meeting – that’s when you know there’s a problem!

Even if you can technically afford the home, your financial surplus AKA your ‘freedom margin’ has disappeared.  In that case, with no spare money, you’re effectively trapped.  To me, that’s an unacceptable way to live.

You can only really “afford” the home if you can do the following:

1- Pay the mortgage
2- Live a sane, decent life
3- Have surplus cashflow to save, invest, and give yourself options

Otherwise, you don’t own the house.  The house owns you.

Ultimately, what you want is to be able to own a home at some point, while keeping a gap between your income and the cost of running your life.  Only then do you have room to breathe and the capacity to build financial independence.

So, how do we actually make that happen?

Firstly… tell the media to f*ck off with their doomer porn

When you see news headlines like:

“It takes 14 years to save a 20% deposit for a Sydney house on a single income”

…they’re layering on a whole bunch of assumptions to paint a very specific (and very dramatic) picture.

But instead of me ranting, let me explore some counter-points to the mainstream defeatist mindset.  Now, I can’t fix anything – but I can give you a whole bunch of levers that optimise how expensive housing is for you.

And I have great news.  No living in a van and no converted shipping containers required!  Just keep an open mind as you read through.  You might not love every single option, but it’s worth seeing how many parts of the equation you can genuinely influence.

Let’s start with something incredibly obvious that many people ignored until recently.

#1. You can buy with a smaller deposit

For some reason, the typical advice has been to amass as big of a deposit as you can before buying – usually 20%.

I’m not sure if this comes from the Barefoot Investor, or the idea that debt is bad, or the idea that a higher payment = mortgage stress.  But for whatever reason, it’s always been there – and it’s always seemed like silly advice to me.

Buying sooner, with a smaller deposit, even if you have to pay LMI, still ends up being a lot cheaper than waiting an extra 2-3 years to save more, while home prices keep climbing (on average).  You save $20k on LMI, only to end up with a $70k higher mortgage due to price growth while you were saving.

So, while this doesn’t make property cheaper, it ensures you get in sooner, by avoiding the ‘big deposit’ religion and the higher mortgage from waiting longer.

#2. You can buy something outside of the biggest cities

Most of you reading this – more than half – live outside Sydney and Melbourne. Which seems to get lost in the national conversation around housing.

Now, other cities aren’t cheap either, but if you’re in Sydney for example, you don’t have to stay there.  It’s likely you could earn the same amount in a cheaper Aussie city or even regional area.  A move to a “second-tier” city – even if it’s just for a decade while you build a strong financial position – can easily knock $300,000 to $500,000 off the purchase price for a similar style of home.

Of course, it’s not as easy as just saying ‘move to the regions’.  There are family relationships, jobs and infrastructure differences to navigate – and that extra cost is seen as non-negotiable.

But it is also worth thinking about the following…

A lot of people who live in Australia right now have literally moved countries for a better financial future.  Yet many of us aren’t even willing to move an hour away 😅

The fact is, if you can’t make the numbers work where you are, location is one of the biggest levers you’ve got.

Maybe you try a different city and decide you don’t like it.  You can always move back home.  The potential upside is you might love it, get a property for 30-50% cheaper, have more spare income to live your life and/or retire 10 years earlier.

#3. You can choose a different type of property

While a house might be the goal, it’s just out of reach for a lot of potential homebuyers.  A townhouse, apartment or villa in a decent location can be a smart low-maintenance option to get into the market.

And yes, there’s probably going to be less capital growth – but I’d say that’s a healthy tradeoff if it means avoiding mortgage slavery or not buying at all.  And ‘capital growth’ should be a secondary consideration for the home you’re going to live in.

Doing it this way will get you 90% of the benefits of home ownership at perhaps 65% of the cost (units cost on average about two-thirds that of a house).  Not everyone needs to have a 3-4 bedroom house on a block of land (especially as their first property). 

A unit can fit the bill for price, location, convenience and maintenance.  And most importantly, the lower price leaves more of your income available to invest and build freedom.

#4. You can choose a different standard/condition of property

This means something a bit older, a bit smaller and/or something with less land (if you do end up choosing a house/townhouse/villa).  Each one of these typically makes a six-figure difference.

Remember, there’s no rule that says you can’t upgrade later when your financial situation allows. 

You can slowly renovate the property over time when you can afford to, helping you get in sooner than getting something picture perfect.

You can live in the same postcode as your friends but have a completely different financial reality, simply because you chose one less bedroom, a smaller courtyard, and a not-so-new kitchen.  It doesn’t take long before you’re paying an extra $250,000 for something only slightly nicer in a few ways.

Please understand, I’m not saying live in a dump.  I’m saying be brutally honest about your wants versus needs, and line that up with your financial goals.

#5. You can opt for something under the median price

This might mean choosing an ‘ugly duckling’ suburb that’s still in a reasonable location, but isn’t your top choice.

When you combine that with the previous point, it can mean mean several hundred thousand dollars off the price.  And that equates to tens of thousands less in mortgage repayments, thereby avoiding the dreaded mortgage slavery.

There’ll always be a whole bunch of suburbs you and I will never afford.  But being overly fussy isn’t going to get you anywhere.

A couple of suburbs further out, plus slightly older and smaller, can literally be the difference between a soul-crushing repayment and something that’s very manageable.  So in a very real sense, that extra 20 minutes on the train is potentially buying you several years of freedom.

#6. You can ‘house-hack’

To optimise housing costs, you could rent out a room (or two) after purchase.  While this impacts your CGT exemption and becomes taxable income, it can be worth it in some cases.

Especially if you plan to simply hold the property indefinitely, or turn the asset into a future rental property – the monthly cashflow is incredibly valuable in helping you smash the mortgage or build investments.

In many suburbs across the capital cities, we’re talking well over $1,000 a month.  Use this room rent calculator to check.  I live in a very average suburb in Perth, about 25 minutes from the CBD, and a room in our house is currently worth $16k per year.

I know several people who’ve done this and turned their biggest cost into a cash machine – often earning enough from multiple rooms to cover most of the mortgage.

Another way to do this is buy an older property that has a granny-flat or ancillary dwelling on it and rent that out.  This is a less intrusive, but ultimately comes at a higher price point.

With this approach, you’re basically trading short-term hassle for long-term freedom.  But just a few years of sharing can take years off your loan.

#7. You can invest first, buy later

There’s no rule that says your first purchase has to be an owner occupied home.  In fact, you might find it’s easier to qualify for an investment mortgage than your own home – thanks to rental income and tax benefits being factored into your borrowing power.

I know several readers who’ve done this to build wealth and get in the market while they enjoyed the flexibility of renting.  Not only are you then in the market, but you also have the option of moving into the property later.

This can keep your personal housing costs lower while you accumulate assets, rather than maxing yourself out with a big PPOR mortgage and having very little cash left over.

By the way, if you’re looking at buying and want help finding the right lender for your situation, you’ll find my mortgage broker listed at the bottom of this article.  They can help you figure out whether a home or investment property would work best with your borrowing power.

#8. You can radically adjust your approach to money

One option is to put home ownership as your number one priority for the next 5 years.

Not just a loose idea that you casually hope works out.  I mean you literally say: “Fuck everything else – I want to own a home, and I’ll do whatever it takes to make it happen.”

What does that mean?  Working longer hours, increasing skills, finding better paying work, and cutting expenses dramatically to stack as much cash as humanly possible.

If home ownership is genuinely important to you, you’ll look back in 5-10 years and be incredibly proud at the ‘radical’ approach you took.  But you can’t just sit and wait for things to get easier.

Think of it like a deliberate and concentrated period of discipline and sacrifice (which is really just picking one thing over another).

Five years of focused effort sure as hell beats 25 years of endless complaining and wishing things were different.

#9. You can team up with someone

This one is not without complication and risk, but it’s possible.

If you find someone like a friend or sibling genuinely in the same boat as you, where you have similar long-term visions and priorities, teaming up to buy a home (or investment property) could work.

Obviously the relationship has to be rock-solid – and you’d want a legal agreement and an exit plan – but for the right pair of people who can’t do it alone, it’s a path to ownership they might not otherwise achieve.

#10. You can become a ‘rich’ renter

Probably not the ‘solution’ most aspiring homebuyers want to hear.  But it’s a way to avoid mortgage slavery and sidestep some of the madness.

The reality is, renting is nearly always cheaper than owning.  Most times, significantly so.  As in tens of thousands per year.  That’s cash you can invest and amass real wealth with.

And while your housing costs will keep going up due to rent rises, you’ll have an investment portfolio growing even faster, thereby making your rent cheaper over time relative to your spending power.  If you commit to saving and investing, you needn’t worry about housing – do it right and you will not be priced out.

The truth is, having money solves a lot of problems.  Being a wealthy renter will be a very different experience from a poor one.

Get kicked out at the end of your lease in a tight market?  You can afford to pay a big chunk of rent in advance, thereby making your application far more appealing than everyone else’s.

Hate moving?  You can just pay movers to do the heavy lifting to take 80% of the hassle and stress out of it.

Get sick of renting?  You can eventually sell some investments and buy something – maybe even with cash.

Or you might decide you enjoy the flexibility and stick with being a rich renter for life.  At higher price points, renting becomes even cheaper relative to buying.  Yields are often in the 1-2% range for luxury properties.

In short, when you become wealthier as a renter-investor, multiple things happen:

1- Everything gets cheaper relative to your spending power, including housing
2- You can easily scale up housing quality without enormous costs (stamp duty, agent’s fees)
3- The rentals you can afford become even better value than buying as price scales up (lower yields)
4- You can always opt to buy a home later if you desire

The whole point is that you’re building options so you’re never trapped in either scenario.

In defense of starter homes

Somewhere along the way, the idea of a starter home went out of fashion.

Nowadays, it’s popular to shit on the boomers for being rich property hoarders.  But regardless, a lot of them were at least willing to live in smaller, crappy homes in their 20s and 30s.

If you look at most homes built 50 years ago, the standard was small footprint and basic finishings.  No butler’s pantry (I still can’t believe that’s a thing).  No theatre room.  No double garage.  No second bathroom.  No fancy gazebo , alfresco area or big sheds.

To be frank, they were fairly shit compared with what people want today.  But most boomers seemingly just accepted their first home wouldn’t be their last – so they bought anything they could afford, chipped away at the mortgage, slowly improved the property, or later upgraded when they had the means to.

What I’m pointing at is a different mindset.  All that to say, despite the stamp duty burden and agent’s fees, I would encourage you to consider a starter home if that’s all your budget will allow.

Think of your home ownership journey in terms of the next few decades, rather than just the next few years.

And I’m not saying buy anything.  But getting in the market with something that’s not quite ideal is still better than trying to find the perfect-yet-impossibly-priced place as your first purchase.

What about singles?

All else equal, it’s generally harder for a single person to buy a home than a dual-income couple.

But I don’t think it’s impossible.  Here’s why…

Just like a couple has the benefit of spreading costs in a rental while they save a deposit, so can a single – by sharing with other people.  Sure, you have less control over this than your own lease, but it’s still a workable strategy (I did this for a few years when I was younger).

There’s also the following…

You don’t need to buy a 3-4 bedroom house like a couple who’s planning for kids.  If you’re aiming to buy the same property as a couple/family… why?

If it’s because you eventually want to find someone and have a family, then remember – they bring their own income and (hopefully) some savings too.  Maybe they even buy a property of their own.  But having each person think they need to pre-buy a family home on a single income is ridiculous.

Now, you might not want to depend on finding financial responsibility in a partner, but it’s something you can decide and filter for.  In any case, trying to buy a 3-4 bedroom house on one income is choosing to play the game on hard mode.

As a single, you can buy a smaller place – even a 1 bedroom apartment – and be perfectly comfortable.  If you can afford to, maybe you do buy a bigger place and rent out a room to help with the mortgage.

I strongly believe that a committed single who’s willing to make tradeoffs can absolutely end up in a better position than a couple where one person is keen and the other just wants to live for today.  From my observation, it’s more common to find couples who have different motivations than those who are fully aligned.

If I was younger starting again today and the goal was home ownership, I would:

— Stay in a share-house (or at home) for as long as necessary
— Save as much as possible (working more hours if needed)
— Buy something small and affordable (or keep renting/investing)
— Avoid a large PPOR mortgage
— Keep investing alongside home ownership

Pulling it all together

Here’s what all this boils down to…

If you’re the kind of person who’s willing to be flexible, adaptable and do what it takes to achieve your goal – home ownership in this case – you’ll find this article empowering and practical.

If you’re the kind of person who’s unwilling to bend and would rather the world change to make things easier, – then you’ll find this article frustrating – and I’m sorry, but life is going to be permanently difficult for you.

The goal is simple: own a home without destroying your ability to create freedom.  And these ideas help you do that.  They won’t, however, win you any status points with your friends.

But at least you get home ownership without becoming a slave.  And if that’s truly important to you, then you won’t care.

Ultimately, you can’t control interest rates, government policy, or what other people can afford to pay.  All you can control is what you’re willing to trade in order to get what you want.

Resources you might find helpful:

 Mortgage Broker
My personal broker for the last 10+ years – Deanna and her team have helped me with buying, refinancing, and debt recycling. Check them out.

 Financial Advice
If you want help to implement your FI strategy, optimise super, or plan your retirement, I can connect you with someone I trust. Find out more.

 Strong Money Australia Book
Your complete guide financial independence in Australia.  Available on Amazon, Audible and Spotify.

If you use the above services, this blog may receive a benefit at no extra cost to you. I only recommend things I use myself and genuinely believe in.