Planning to purchase my first property. Help please!!

Lnigelixtiti on 29/01/2014 - 19:46

Hi all,

I'd like to begin by stating that I don't really use OzBargain that much and this is pretty much my first time using the forums. But from briefly reading through some threads in the forum, I think its safe to say that this is a pretty decent community and would be an alright place for me to ask this. Apologies in advanced if this turns out to be a long read, but I'm mostly trying to not leave out any important details.

I've recently graduated from university, and am now working in my first job. I live far out in the west of NSW (Quakers Hill) and it takes me an hour and a half everyday to get to and from work (Wynyard). Some of you may deem this to be a tolerable amount of time spent in travel, but personally, I'd like to live somewhere closer to work and the city in general. Hence, I've made a decision to hopefully buy my first property by the end of next year.

Some details about what I'm looking for specifically and a brief look at my current financial situation:

  • Looking to move into an apartment that's hopefully 30-45 mins away from the city max by public transport. Apartment has to be a 2 bedder, with at least one car park space. If no such option is available within my budget/ price range (more on that below) I will decide to stay at home, wait for a salary hike and then reassess my options.

  • Currently earn ~$46, 000 a year net. I don't really know much about my capacity to loan or about the best deals out there, but having spoken to a personal banker, my capacity to loan was estimated to be about 480-510k depending of course on many other variables.

  • Have around 8 k in the bank, with another 16k or so in blue chip shares. No credit cards or debts of any sort, and if all goes according to plan (my budget) I should be able to save $35,000 of my salary this year.

So that's the gist of things in a nutshell. Basically I am looking for advice on:

  • Locations. Given my criteria and my capacity to loan etc, where would be the best place to look at. I've done some light digging and found places like Chatswood, Lindfield to have apartment listings (not many at all) that meet my criteria and price range. St Peters also seems to have alot of options, however I wonder why that is given its sort of close to the city.

  • Financial Advice. Is there something I could be doing to further boost my financial standing? Currently I have minimal debt and expenses (I find it difficult to spend more than $400 a month), and have some money in shares (ASX hasnt been doing well of late). Does it even matter? Since your capacity to loan depends mostly on your salary anyway, not how much you have saved up.

  • Loans. Have no idea on where I can get the best deals/ interest rates. Also have no idea on the smartest way to approach this.

  • Should I be thinking about this at all? Given how I am literally 2 weeks into my first job out of uni, is it even a good idea to be thinking about moving out and taking out a mortgage of ~$450,000. Should I maybe wait? If you're wondering if I want this urgently, yes. If I could rate how much I want this out of 10, it would be an 8.

Sorry for the long read guys, as I was typing this up, I realised I've typed more than I expected to initially.

Given that I am pretty young and inexperienced, ANY advice at all will be greatly appreciated. Even if you think it's unrealistic for me to be thinking about all of this.

Financial

Comments

  • pax on 29/01/2014 - 20:02

    As you will be living in your property, as opposed to investing, I would not only research your target area, but how you would travel to places other than work (sports, social, family, etc).

    Most places right beside transport cost a lot more than places, say 1-1.2km away. I was happy to walk that distance to the train, and so you would get a wider pick at a more competitive price, or larger property.

    The saying used to be, choose the worst street in the best suburb, but with competition as it is, I have heard choose the worst house in the best street. Make of it what you will.

    As you are looking for an apartment, take into account strata fees, and ask how big the sinking fund is as well as what major issues have been found recently, especially on places less than 10 years old.

    Best of luck in finding and securing a place.

    Pax

  • lisss on 29/01/2014 - 20:12
    +1

    Financial Advice. Is there something I could be doing to further boost my financial standing? Currently I have minimal debt and expenses (I find it difficult to spend more than $400 a month), and have some money in shares (ASX hasnt been doing well of late). Does it even matter? Since your capacity to loan depends mostly on your salary anyway, not how much you have saved up.

    • Capacity also depends on the size of your deposit, as that is something that the bank can take security over
    • Consider the size of your deposit and avoiding LMI etc
    • I think you'll need a guarantor if you want an approx 430k loan on your salary

    Loans. Have no idea on where I can get the best deals/ interest rates. Also have no idea on the smartest way to approach this.

    • Google 'comparison rate' and understand what this means. Start familiarising yourself with terms and conditions. Go and talk to the banks.

    Should I be thinking about this at all? Given how I am literally 2 weeks into my first job out of uni, is it even a good idea to be thinking about moving out and taking out a mortgage of ~$450,000. Should I maybe wait? If you're wondering if I want this urgently, yes. If I could rate how much I want this out of 10, it would be an 8.

    • I can't imagine any bank lending to you if it's your first ever job while you're still on probation

    • Have you considered a share house or cheap rental? That may help with the distance and you'll be able to keep saving, and also learn about what you like/don't like in a property.

    Good luck!

    • nigelixtiti on 29/01/2014 - 20:30

      Hi liss,

      Thanks for the feedback. Just to clarify, this is my fourth job overall. I have previously interned/ worked part time at various other places, this is my first 'full time job out of uni' shall I say. no longer on probation.

      Also, I have considered rental and am not for it.

      your feedback was very much appreciated. Thanks again. I have a lot of reading up to do.

      • iseenya on 29/01/2014 - 21:41

        Two weeks into your first real job and not on probation? A three month probationary period wouldn't be unusual in your circumstance - you'd be best to check your status with HR, I think.

        • nigelixtiti on 29/01/2014 - 22:20

          lol sorry let me clarify again.

          I was an interning at this firm since August last year (I didn't say this before, apologies). Passed the probation period and got offered a full time job, which is where I'm at now.

          So technically this is my first 'full time job upon completion of my uni degree'.

          Either way the plan is to buy a property (hopefully) within 2 years, not immediately. Hope this clears this up.

  • kasumi on 29/01/2014 - 20:19

    In the price range at lower north shore, you're probably in the market for the older apartments but your strata would be cheaper (as it's probably no frills with no lift or pool) but sink fund may be high. You need to factor in all additional costs as well such as electricity, water, gas, groceries etc… so you need to sit down and do your sums.

    You also need to save 20% deposit (with a record showing regular savings). I know you don't really need 20% deposit nowadays, but anything under you will have to pay a lenders mortgage insurance which can range from a few thousand to several thousands, so might as well save a little bit more.

    Otherwise, there was a thread last year with a guy in the same situation and i think most people recommended him stay at home but there was a lot of great info in it. I did a quick search but couldn't find it, so i hope someone remembers it and can link it

  • YadaYadaYada on 29/01/2014 - 20:46

    I am in the market of buying a property, and I have spent lots of time with a lender to understand the ins and outs of the whole process.

    To be able to get the 480-510K loan on a 46K base salary, I suspect you will be paying lender's mortgage insurance (which also compounds). My best advice is to save up a bigger deposit. Your capacity to loan depends on a few things (and maybe more - I'm not an expert! This is based on what my lender has told me in some long sessions in the last year):-

    • Your salary and any other income
    • Your liabilities and debts (including credit cards, even if you pay it off each month - the monthly minimum repayments will be taken into your account.
    • The current interest rate (usually you are assessed at the current interest rate + buffer), so at the current point in time, you will be approved for a bigger loan, than a few years ago when interest rates were ~8%.
    • Your ability to service debts, basically trust that you'll be able to pay it off.
    • The balance of your super account - this is in case you pass away, and will contribute to the servicing of your loan.

    If you have a bigger deposit, and bring a bigger amount to the loan, you will get better interest rates, and have to borrow less (no MLI). When borrowing that much money, every bit counts, especially when interest compounds.

    If you want comparisons, go to a mortgage broker (or several). You don't necessarily have to get a loan through them and it's usually free to see one, but they can take you through the different options.

    In regards to locations, I suspect the apartments in St Peters are quite small and probably old for that price range. Either that or they're quite far away from public transport. The 2 bedders in that area generally go for about 100k more.

    • nigelixtiti on 29/01/2014 - 22:24

      Just to clarify, its 46k ish net. I.e $60, 000 base before tax and super.

      I suspected as much about St Peters. It felt abit odd, maybe I got the suburb wrong.

      Thanks for the feedback.

    • wanga1983 on 31/01/2014 - 12:37
      +1

      What do you mean that LMI "compounds"? It's a amount payable at the formation of your loan facility, so that's the first and last time you need to pay LMI. It's roughly 2% of the loan amount.

      So it offers the OP an additional financing strategy which would otherwise not be available to him, which I reckon is not a bad thing.

      • dimgai on 01/02/2014 - 23:21

        What do you mean that LMI "compounds"?
        I think they may be referring to LMI premium capitalisation, which is adding the LMI premium on top of the loan amount. Effectively increasing the loan size by the LMI premium payable then with compounding interest paid on this additional amount over the life of the loan.

  • Duff5000 on 29/01/2014 - 20:52
    +2

    You may have already thought about it but also consider your ability to repay should interest rates go back up. In 2008 they were almost double what they are now.

    • nigelixtiti on 29/01/2014 - 22:21

      Very good point. Interest rates are at an all time low at the moment.

      • CleverCounter on 30/01/2014 - 21:51
        +1

        You could fix your rate and lock something in around 5% to 6% at the moment. Then you don't have to worry about what they are going to do. You can also switch to interest only if you need to drop the repayments down a little. Most loans should have that option.

        • nigelixtiti on 31/01/2014 - 09:48
          +1

          Yep, was considering it. Fixing interest rates seems like the smart move especially if you dont forsee interest rates going down. However, speaking to my banker apparently the norm is for a portion of the loan will be fixed and the other variable.

          Not a fan of interest only payments, maybe because I'm looking at it from a very simplistic view. Haven't fully put much thought into it though.

        • wanga1983 on 31/01/2014 - 12:40
          +2

          It would depend on your investment strategy and long term goals. IMO if you have a full offset facility that is just as good as paying down the principle, with the added bonus of not being penalised if you wish to pay it down quicker and / or the flexibility to use the money for other things.

    • nikey2k27 on 01/02/2014 - 22:53

      Take this into account i next few month i can see alot of people have sell there house as rate go back up. i know people 60 left after pay there home loan basic cost of living each week.

  • RockyRaccoon on 29/01/2014 - 21:28

    I dont know what type of work you are doing, but if its a job which has many opportunities in the city, then settling down in one place would make sense, but if its one that to get advancement or further opportunities may mean relocating or traveling to other cities etc, then buying a place may be limiting. Living say in Lindfield is great if you work in the city, but if you get a job in Campbelltown…

    Renting while it may be expensive may actually save you money if you have to sell and move, which can be far more expensive, if its something you need to do not long after buying.

    Plus pay attention to Duff5000's point

  • onlyletters on 29/01/2014 - 22:15

    My advice to you is to purchase a property for the long term, your first house is exempt stamp duty and you are entitled to a first home owners grant, if you sell and buy something else, you will have to pay stamp duty on your next property when tax time comes along.

    You need to evaluate how much maintenance the property will need, can you be bothered cutting grass? Also, now that the interest rate is low, your eligibility might be looking good, but can you keep up with the repayments if the interest rate was to increase back to what it was 2 years ago?

    Its great owning your own place, but its not for everyone.

    • YadaYadaYada on 29/01/2014 - 23:10
      +1

      The first home owners grant in NSW is only for new properties, not existing ones. All the other states are either doing the same thing, or following suit from what I read.

  • EmmaM on 30/01/2014 - 07:50
    +2

    My advice would be hang in as long as you can where you are to save up a bigger deposit. Every $1k you save up now saves you about $9k in interest over the life of the loan. Scary hey! At least try to get to the 20% to avoid mortgage insurance and have more bargaining power with the banks. Also focus on making sure your credit rating is great for same reason. If you don't have a credit card sometimes having a small one but paying it off in full each month is actually better for your rating.
    If you are going to wait chek out first home saver accounts. Interest is taxed at a lower rate plus you get co-contributions I think of $6-9k per year. Some restrictions apply so read carefully but well worth it. Good luck

    • TheBatman101 on 30/01/2014 - 11:17
      +4

      Hi Emma,

      Just wanted to clarify that having a credit card, even with a zero balance, is seen as a liability by the banks.

      It impacts how much you can borrow and their willingness to lend because it is seen as further available credit you can access that MAY impact your ability to repay their particular loan.

      The US has a system that looks to incentivise people who hold credit, repay it and handle it well. This however doesn't exist in Australia.

      Wanted to clarify that out loud for any youngen's reading this. My comment is meant very nicely, just wanted to clear this up =)

      Cheers,

      BATMAN!

      • Duff5000 on 30/01/2014 - 11:40
        +2

        Semi off topic. I couldn't get a mobile phone plan some years back because i didnt have a credit card. Every other part of their checklist i had good marks for. Was told to get a credit card (despite not needing one). Once i had a credit card the application went straight through, stupid.

        • TheBatman101 on 30/01/2014 - 13:24

          It's hard Duff, I too am caught out constantly because I choose to live without a credit card. Even at work I am told to simply 'put it on credit card and then submit an expense'.

          Not so easy for those of us choosing to live without a credit card.

          Even Visa Debit cards don't suffice in some circumstances when signing up for things. E.g. like your mobile phone plan scenario.

      • CleverCounter on 30/01/2014 - 22:04

        Agreed Batman, that's consistent with my understanding of lending rules.

    • CleverCounter on 30/01/2014 - 22:01

      What about the cost of the property increasing while your trying to save? Its going to take years to save $60,000 deposit on a $300,000 home. I hate the idea of paying Lenders MI, but it's how banks do their lending now.

      You could save yourself some big bucks if your prudent with your offer price on houses. This is more likely to be the deal maker. Best of luck

      • horsome on 30/01/2014 - 23:53

        $35k saving a year wont take long at all!!! And that sort of annual increase in capital will knock the rate of increase in house prices for most areas of Australia out of the park in this flatlined economy.

  • sheikyerbouti on 30/01/2014 - 07:53
    +7

    OzB is prob not quite as good a source of advice as a licensed financial planner.

    You're young. Screw the mortgage. Rent. It costs WAY less to rent and allows you to scope out suburbs and accommodation types before jumping in…

    • nigelixtiti on 30/01/2014 - 19:43

      You've definitely made me reconsider renting. Thanks for the input.

      • bajillionaire on 01/02/2014 - 18:51
        +4

        Buy somewhere you don't want to live, but will be a good investment, ideally positively geared and capital growth every year. Go for an interest-only loan. This way, the rent will more than cover your repayments, you're getting a little dividend as well, and the size of your investment is increasing while you let the bank do the heavily lifting. Sell after 10 years and pocket the difference. Rinse and repeat. Of course, the hard bit here is finding a property that ticks those boxes.

        While you're doing this, rent a room in a sharehouse somewhere you can't afford to buy, and enjoy your youth.

    • danyool on 31/01/2014 - 02:05
      +2

      If you do rent though, it doesn't mean you can't still save the difference and build up your savings. It may be for a house, or maybe in a few years you'll want to travel, or maybe you'll lose your job - having a good pile of cash gives you options.

  • boccos on 30/01/2014 - 08:56
    +7

    The closer to a more populated place the more costly it is to live (contrary to what most tell you). Units have body corporate fees plus rates/water/garbage/etc. In our area it costs about $100/week for these including insurance. Then you need to make repayments on any loans. Do you budget and check your figures with a financial advisor, not a mortgage broker.
    And take a look around you, there are a lot of businesses closing. This means that the Aussie economy is slowing. People are losing jobs. Real estate is still mostly on its way down due to the necessity of some having to dispose of their property at lower than normal prices in order to move to places that offer jobs or to avoid bankruptcy.
    Check the boom/bust cycle of the region you intend to buy into. Ours is 7 years. Buy when the market is still slowing towards the end of its normal cycle (and hope that it does indeed follow the norm). Preferably buy a run-down house (with land) or a deceased estate in an older persons area where crime tends to be lower. Keep the mortgage as low as you can even if you have to extend the property to meet your needs later.
    Use the cycles to your advantage. Be careful when fixing terms on home loans, check penalties for early pay-outs. These apply even if you sell the home within the fixed term.
    It may seem I am negative , I'm not. I am a big believer in home ownership. But not at the sacrifice of your soul.

    • nigelixtiti on 30/01/2014 - 19:42
      +1

      Agree very much with your last line. Thank you for the input

  • clucky on 30/01/2014 - 09:37

    I would say the best thing is to go see a financial planner, prepare yourself to pay some fees for realistic long term advice.

    A licensed financial advisor would be able to provide you with most updated info including the latest legislation as it changes all the time, as well as possibly some not widely known ways of saving plans.You do pay for what you get! So, if you are serious about all this, go get a independent financial advisor (not one from the banks, as they are limited to what they can advice you on). You may find that you'll end up with more in your deposit than what you could do yourself, as they would find the best solutions to your needs.

    I cannot give any advice through ozbargain, all I can say is there are lots of potential to explore and you'll definitely be in better position once you've seen a financial planner.

    • danyool on 31/01/2014 - 01:38

      er, really?

  • WT on 30/01/2014 - 09:39
    +6

    I would mooch off mum and dad a bit longer.

    • nigelixtiti on 30/01/2014 - 19:42

      Haha. Financially that would be the best option. But at the moment I dont realy mooch of Dad anyway. I pay for the gas bill at home, my own phone bill, and provide for myself food wise. Last month, Dad broke his TV, I had to buy a new one for him, else I had to give him mine!

      I'm not saying I don't rely on my parents of course I do, but I'm definitely not mooching of them, at least not to the point where they pay for almost everything. If I was, I'd probably lean towards staying at home more.

      But thanks for the input dood!

  • one man clan on 30/01/2014 - 09:55
    +2

    I think you are going to struggle.

    I was in a similar financial position to you when I finished uni. Bought my first home last year, after working full time for 4 years and living at home. I had a 20% deposit and help from my parents, and could afford a 1br place in Alexandria (adjacent to St Peters, and I can use St Peters station).

    • nigelixtiti on 30/01/2014 - 19:38

      Fair enough dude. Thanks for your input.

  • tyler.durden on 30/01/2014 - 10:30
    +10

    All other animals can find a home that is free

    Humans need to work for the entirety of their life just to pay for their home

    How sad….

    • YTW on 01/02/2014 - 08:04
      +1

      Not many other animals have electricity and indoor plumbing. Except wombats of course.

      And if it takes you your entire life to pay for your home then you are doing something wrong.

    • nikey2k27 on 01/02/2014 - 23:02

      well that total true.

  • spinningfree on 30/01/2014 - 12:40

    Given a loan of $480k, you'll be looking at places around $600k with a 20% ($120k) deposit. Personally I'd try and save the 20% deposit rather than pay LMI (or work for a bank/have a family member work in a bank and you can potentially borrow 10% with no LMI).
    With a purchase price of $600k you'll be hard pressed to find a two bedroom in St. Peter's or chatswood atm let alone when you are ready (unless prices drop). I would consider the Rockdale/kogarah area (20mins train to city). Buy in an older 60s, 70s block with low strata and no facilities.
    Also, if you were to see a financial planner all are mostly concerned with making a sale rather then what is best for you, more often then not they will recommend you invest into managed funds and charge you a big entry fee just to do so. If you go down this path be aware of this and see a few different planners as the first meeting is obligation free. Personally I'd just put my money in a high interest savings account as it's only for a short time being a year or two and the last thing you want is volatility.

    • nigelixtiti on 30/01/2014 - 19:37

      Alot of people seem to suggest that I should gain expert opinion. I have an uncle who is a planner (although he specializes in insurance and super), maybe he'll be able to refer me to someone.

      Also didnt know Rockdale is that close. Never really considered the south, but will do soon.

      Thanks for the input, much appreciated.

    • danyool on 31/01/2014 - 01:37

      Was having exact thoughts on the financial planner idea prob not being the best, as in, they will probably recommend putting your money into managed investments so they get a cut, but if you're wanting it in only 2 years it's a bit risky (recommended timeframes are usually 5-7 years to limit volatility). High interest savings accounts is probably best for safety. You know what you'll have in 2 years time.

      • nigelixtiti on 31/01/2014 - 09:50

        Very valid point danyool. Am starting to re-think my time frame after reading most of the responses.

    • wanga1983 on 31/01/2014 - 12:50

      Furthermore, I suggest you get a valuation done on the place you are looking to purchase. As much as the "market" decides the price of properties, ultimately it's the banks that have the greatest influence on prices because they regulate the amount of credit available to buyers.

      What I mean is that you may be looking at a property advertised for $500k (which may seem like fair market value) but the banks and their panel of valuers reckon it's only worth $450k and offer you a lower maximum LVR of say 70%. In this scenario, you would actually need to prepare $185,000 (0.3x450 + 50) instead of $100,000 (0.2x500) that you initially expected. This is before you factor in stamp duty and other transaction related costs such as fees etc. This is true for many inner city postcodes or areas with imbalanced supply.

      For this same reason, it also pays to shop around different lenders to get the best overall finance deal in place rather than simply chasing a better headline interest rate.

      In many cases getting a slighty run down free standing house would be a better long term option, than say an apartment, because:
      - you have additional rooms which you can rent out, helping you pay down the mortgage quicker
      - you have land, which is the appreciating component of the property
      - you could work on the house slowly, not only is it a satisfying feeling for some it is also a good way to increase capital value
      - houses are generally less influenced by the above "banking discounts" than apartments

    • YTW on 01/02/2014 - 08:11

      "all are mostly concerned with making a sale rather then what is best for you"

      Massive generalisation much? Have you really checked out every single financial planner in Australia?

      • wanga1983 on 02/02/2014 - 16:52

        I think what spinningfree really meant to say is that it pays to do your own research so that you're best prepared to make the best decision for your personal circumstances, rather than relying on a Fin Planner who inherently have a conflict of interest in the advice given as many make a living from the commissions gained by selling you alternative financial products.

  • Angelababy on 30/01/2014 - 15:16
    +1

    Assuming you pulled together enough deposit to end up with a $450K principle and interest loan over 30 years.
    Say interest is 6% (to be conservative)
    Monthly repayment is $2698

    If you go interest only then repayment drops to around $2250 a month. You are not paying down the loan but as house value goes up you are still building equity. Maybe you can do this for a couple of years to get your foot in the door. Aside from repayments there are also body corporate/rates, water, electricity, gas, internet, phone bills etc every month/quarter to consider.

    If you do end up getting a two bedroom apartment, would you consider renting one of the rooms out to help with costs?

    I don't think you are being unrealistic… in fact its a very smart move to try and get your foot in the door.
    I wish I had done it 5 years earlier BUT you do have to think about the what ifs.
    If you lose your job or run into money troubles can someone in your family help out?

    • nigelixtiti on 30/01/2014 - 19:35
      +2

      I've considered interest only payments, but that sounds alot like rent in some ways.

      Monthly repayments being 2698 sounds about the same as the figure my banker quoted. I'm on $3,900 a month NET. so I'd realistically have $1200 left per month for the rest. I haven't thought everything out yet, but that much I have.

      I have considered renting out one of the rooms as well (which is why I am seeking a 2 bedder tbh). This will no doubt help with costs.

      Thanks for your feedback angelababy. I appreciate it very much.

      • wanga1983 on 31/01/2014 - 12:57

        For an interest only loan you can declare it as an investment property and use that to reduce your personal income tax (cf negative gearing). Of course if you actually live there as well you are saving several thousand pa in rent money which would otherwise have gone towards paying down somebody else's mortgage.

        It's good you're thinking about it now - get in early, 'cos time is the friend to every investor.

        • SBOB on 01/02/2014 - 08:48
          +1

          For an interest only loan you can declare it as an investment property and use that to reduce your personal income tax (cf negative gearing). Of course if you actually live there as well you are saving several thousand pa in rent money which would otherwise have gone towards paying down somebody else's mortgage.

          declaring it as an investment property and living there at the same time don't go together….

        • wanga1983 on 02/02/2014 - 16:55

          Speak to your accountant about the treatment of the rentable portion of your property; my understanding is the direct costs (ie. interest, rates, maintenance) directly related to the the "income generating" aspect of the investment can be used as a legitimate deduction. So if 2 of 3 rooms are rented out then you may claim 2/3rd of interest repayments as a deduction. Again, please seek confirmation from an experienced accountant with regards to your personal situation.

  • jc8 on 30/01/2014 - 15:18

    If you are going to buy a house shortly get a first home savers account (ie. MeBank) and put in $6k this financial year and $6k the next in July. This will give you approximately $1k for every $6k contributed in each financial year paid from the Govt and will be transferred to your mortgage upon buying your first home (It's vital you contact them). You can do this across a maximum of 4 financial years.

    • Angelababy on 30/01/2014 - 15:27
      +1

      These accounts aren't very popular cause there is a 4 year rule. You have to wait till the end of 4 years before you can draw the money out even if you have already bought a place within these 4 years.

      • chill on 30/01/2014 - 21:13

        2 years and 2 day depending on when you set it up.

        • cannedhams on 31/01/2014 - 18:00
          +1

          3 years and 2 days. You cant access the funds until the fourth financial year has passed. Believe me, Ive got one. I only realised this after I'd put in the first 6k, f**k!!!

        • danyool on 31/01/2014 - 23:57

          If you've only just done it, you could withdraw it on cooling off period. 14 days i think.

          Otherwise, I thought you could access it when you've met the condition in the 4th year (deposit at least $1,000) - just you won't get your last bonus till the end of that year.

    • danyool on 31/01/2014 - 01:41

      You can do this across a maximum of 4 financial years

      Think you might mean that you need to do this over a MINIMUM of 4 financial years.
      (you can contribute each year for as long as you like either until you buy a place, reach the account balance cap (currently $90,000) or till you're 60/65 and then it get's transfered to your super - http://www.ato.gov.au/Individuals/First-home-saver-account/

  • IMBI3 on 30/01/2014 - 17:32

    Find a reputable broker to work out how much you can borrow. This would be a good starting point to narrow down the area

  • horsome on 31/01/2014 - 00:23
    +9

    I would hold off dude. If you are a career man, and your well detailed summary indicates you are, I would focus on trying to be great at your chosen profession. If you cant handle the commute then rent somewhere closer. You will need to be very agile early in your career dont let a life sentence such as a mortgage bog you down.

    • one man clan on 31/01/2014 - 09:28

      This is actually probably the best bit of advice in the thread.

      Consider this: you hate your job and the job of your dreams comes up somewhere else with great opportunities for advancement but it's a pay cut and you can't take it.

    • nigelixtiti on 31/01/2014 - 09:52

      Thanks. I'll strongly consider your advice. Appreciate it.

    • mousie on 31/01/2014 - 17:51

      Sound advice I think.

      Disagree with the feedback that a mortgage is a life sentence though, although you're not always guaranteed to end up ahead with property!
      Also you may find that you need to go back to uni and smash out a masters to get the job that you want. The salary that you're on is good for a grad - just provision for having savings / a life and don't go over your head.

      • horsome on 31/01/2014 - 19:47

        Thanks guys, and yes I was a tad dramatic on the life sentence.

  • tabz on 31/01/2014 - 11:13
    +3

    Hey nigelixtiti,

    Firstly, congrats on deciding on purchasing your first property while still in your first job. Wish I was that determined straight out of uni.

    I've recently bought my first apartment just over 2 years ago, and from my own personal experience, there's a lot of things to consider when buying property. Hopefully some of this will help.

    Locations.
    This is really down to preference. I can't recommend any particular areas since I don't know what the market is like these days. Attend some open houses if you need to. There were a lot of times that I saw an advertised apartment which looked good in the photos, but turned out to be horrible.

    Financial Advice.
    This depends on when you need access to your money. If you need it within the next couple of years, the safest option is to invest in balanced or defensive assets (such as fixed term accounts) which usually will yield a better return than high interest savings accounts. It's true that the loan capacity is mostly tied to your salary, but to some extent, lenders do want to see evidence of constant savings.

    Loans.
    Find a good mortgage broker. By that I mean one that has a large panel of lenders with the same commission percentage. Sometimes they have access to loans that aren't advertised too. In case you didn't know, you don't pay mortgage brokers anything, so the service is free to you. I live around your area too, so PM me if you want the details of the broker I used. Also as others have mentioned, save a bigger deposit (so that your LVR is less than 80% so you dont have to pay for Lenders Mortgage Insurance).

    Should I be thinking about this at all?
    Yes and no. Great that you're thinking about buying your own place, but reconsider taking on a mortgage of ~$450k. Just because you can borrow that amount doesn't mean you should. Sure there wouldn't be any issues servicing the loan, but you still want to be able to have enough money to enjoy life.

    Other things to consider is what your plans are down the line once you decide to upgrade/move to a bigger place. would you sell the apartment? or would you keep it as an investment property? If the latter, consider a cheaper apartment possibly still on that same side of Parramatta where the rental income would cover the costs of your mortgage repayments, and get a loan with an offset account.

    Anyway, goodluck and do plenty of research.

  • humilem servum tuum on 31/01/2014 - 13:35
    +5

    Good on you mate for considering buying your first property. And here's my 2 cents to hopefully help you along

    Are the apartments/property that you are looking for brand new or being built? If so, you may be eligible for the First Home Owners Grant. See the NSW Office of State Revenue's website for more details http://www.osr.nsw.gov.au/first-home-buyers.

    If they are existing establishments (i.e. already built and owned by other people), there doesn't seem to be any other government funded assistance programs available to help fund the purchase of your property. With the exception of the First Home Savers Account "FHSA" (which can only be accessed after 4 years of being in the program & having deposited at least $1,000.00 in each of those years). If you can wait 4 years, seriously consider having this FHSA as there are some good benefits to be had, e.g. 17% contribution from government tax free, FHSA are interest bearing accounts, I think most don't have bank fees and the interest earned is taxed at a final tax of 15% (i.e. you do not include this interest in your income tax returns). See the Money Smarts website here for a list of banks that offer FHSAs https://www.moneysmart.gov.au/managing-your-money/banking/sa…

    If the apartment/property is brand new or being built, your stamp duty may be $Nil. But if the apartment/property is for an existing establishement, your stamp duty can be very expensive. You can use calculators such as this one from Infochoice's website http://www.infochoice.com.au/calculators/stamp-duty-calculat… to calculate stamp duty.

    It is highly recommended to have at least a 20% deposit for purchasing your property. As was previously highlighted, this should avoid having to pay insurance to service your home loan.

    Just make sure you can afford to service your home loan/mortgage. As an example, a mortgage of $450k at 6% over 25 years has roughly $2,899 monthly repayments using the Money Smart calculator here https://www.moneysmart.gov.au/tools-and-resources/calculator…

    As was stated before by other posters, you could get a mortgage broker to help you find a suitable home loan/mortgage. If so, consider getting some commission back to help service the home loan/mortgage. A list of mortgage brokers that refund commission can be found from this link here http://au.news.yahoo.com/today-tonight/latest/article/-/1522… (you should note that this article isn't current but still provides a handy list).

    Another thing that you could do is package your home loan/mortgage for the best deal. What I mean buy this is having multiple products with your mortgage provider such as having a credit card with them, insurances etc.

    Another thing that you should consider is opening up an offset account. The beauty about these bank accounts is that any spare cash that you have deposited into theses offset accounts reduce the mortgage balance used to calculate your interest. Just Google for offset accounts to find banks (like BankWest) that offer these types of accounts. Just be aware that banks may charge a fee to allow you to have and/or maintain an offset account.

    When seeking a home loan/mortgage ask yourself what features you would like the loan to have e.g. loan redraw facility, early repayments without penalty etc. There's a lot of homework to be done and it may be wise to get some initial help from a mortgage broker.

    Personally, given your current circumstances, I'd wait on buying your first property for the following reasons:

    1. Need to have at least a 20% deposit;
    2. In that time, open up a FHSA to get at least 17% of my contributions from government tax free;
    3. Selling your shares in bear market doesn't make sense as you are selling them when they are under-performing and you'd get hit with a capital gains tax event, meaning you'd have to calculate your capital gains/losses on the shares. If it's a capital gain, then you may need to pay additional income tax in your 2014 income tax return (which is bad given that you need to generate healthy cashflow towards your deposit). If it's a capital loss, you'd have to wait awhile until another capital gain comes along to offset it.
    4. You are young, you have heaps of time available to wait. In that time, you could do more research or better home loan products may become available. Just because interest rates are low doesn't mean that everyone should get a home loan.
    5. As was noted by other posters, if your dream job becomes available after you bought your property, then you'd need to consider selling your property or renting it out and possibly relocate.

    Obviously I haven't mentioned lawyers or property inspectors but acquiring services from these professionals is a must when buying a property.

    There are loads of websites that have useful information that I will have missed so go out there and learn more e.g. here https://www.moneysmart.gov.au/life-events-and-you/life-event… or here http://www.housing.nsw.gov.au/Home+Buying+and+Building/Buyin…

    Good luck and hope my advice was useful.

    • humanpiranha on 31/01/2014 - 17:17
      +1

      Great advice +1

      Save at least a 20% deposit (no lenders mortgage insurance will be paid), contribute $6000 into a First home savers account for the 17% contribution from government plus 3.5% interest which is taxed only at 15%, you won't be able to get returns of 20.5% this easily elsewhere!

      Rent or save up whilst in your parents home and get a better feel for the housing market and what you would actually like. Also this website: www.mutilatethemortgage.com has a tremendous wealth of information on mortgages from an Australian perspective and also has links to other great sites which will help in your endeavour.

  • illumination on 31/01/2014 - 15:33

    People recommending that he don't buy a property for the sake of his career. Can he not just rent out the property and move? What's the problem with doing that?

    This is another option for Cashback from homeloan: http://starthere.com.au/Home-Loan

    • one man clan on 31/01/2014 - 16:18

      What if he can't get a tennant?

      A week or two is fine, what if it's for multiple months? He's paying rent and a mortgage?

      • illumination on 31/01/2014 - 17:18

        Surely won't be that difficult for the suburbs that he's looking at..?

        • cannedhams on 31/01/2014 - 18:07
          +3

          He will be taking out an 80%+ mortgage, at rates of 5-6%. Best chance scenario, he rents it out for a 6 or 7% gross return, which probably works out to 5 or 6% net return once down time, letting fees, yada yada yada are taken into account.

          That amounts to substantial risk for a 1% return (maybe). Whoop de bloody do. Hopefully some capital gain as well, but I wouldnt bet the farm on it.

  • akula on 31/01/2014 - 19:28
    +1

    The interest rate is very low so the property prices are at all time high. Did you see the auction clearance rate ? My advice - Wait at least till end of 2014 and speak to independent mortgage consultants . Renting is a wise solution until you have more than 20% deposit. Khan academy has a great video explaining renting vs buying. Even tough it's US oriented you can definitely get an idea.

    https://www.khanacademy.org/economics-finance-domain/core-fi…

    try this also
    http://www.nytimes.com/interactive/business/buy-rent-calcula…

  • YTW on 01/02/2014 - 08:23
    +1

    Lots of good advice here which I won't repeat.

    One thing I will add is don't ever listen to what the bank is saying you can borrow. When you do the numbers (not just the loan, look at all costs associated with each property) there is a sweet spot, where you are able to get on top of the loan. Anything above it and you'll just be treading water, which in the long run will cost you a fortune.

    Stay home, be patient, your time will come.

    • nigelixtiti on 02/02/2014 - 00:08

      Thanks for the advice YTW. Very helpful.

  • movieman on 07/02/2014 - 12:28

    Hello OP,

    First off, congratulations on deciding to own your first property.

    I'll just chime in and add what is one of the principle's in "The Richest Man in Babylon"..

    What I got from it was 'Own your own roof'.. Don't rent, if you can afford it.

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