Hey OzBargain, do you stress about your mortgage?

LMouthful on 07/06/2017 - 22:12

Hello Friends,

Don't usually post but I'm looking for some advice on purchasing a place Sydney. Earning around $140k pretax p/a and have parental help for a deposit. To buy anything remotely decent will need about a $600k loan which scares me at about $3000 a month to service. Any advice for a first home buyer who feels like his missed the boat on property in Sydney? For those with a similar earning/debt ratio how does it play out in reality? Is it stressful? Would you do it all again?

Thanks in advance.

Financial Home Loan Loan

Comments

  • dcep on 07/06/2017 - 22:43
    +2

    calculate your expenses and weigh your lifestyle.

    if you're not having avocado toast as breakfast, then you're fine.

    still plenty left if you don't have a lavish lifestyle.

    also to consider job security.

    • Steptoe on 11/06/2017 - 21:16

      More than calculate, live like you have a mortgage by saving the forecast repayment/costs amount.

  • chriskq on 07/06/2017 - 22:48
    +1

    i agree it would be very hard to do as a single which it sounds like you are. As a couple we are mortgaged to the hill, but essentially all my pay goes on the mortgage (as the higher wage earner) and we live off my wifes salary. We are on our 2nd home and 3rd mortgage provider (all done via our original aussie broker). Best tip is make sure your mortgage comes with an off set account so you can reduce your interest if possible.

    Yes i would do it all over again as the old adage of rent money is dead money rings true and when we save up enough we will renovate our current place with the end goal of it being our forever home.

    Whilst their might be a bit of a Sydney bubble, depending on where you buy (we are in eastern suburbs) i think it will never really go backwards.

    • Mouthful on 10/06/2017 - 10:08

      Thanks for the advice. Would love to buy blue chip areas, but really my budget would only work for a 1 bed apartment. Would love a 2 bedroom/house, so I can potentially have a roommate and claw back a little bit of money. I may wait a couple of months because the apartment market seems a little volatile right now.

  • [Deactivated] on 07/06/2017 - 22:49
    +1

    A good mortgage will make you a better and more appreciative employee :) Paying off your mortgage and freedom leads to 'Take your job and shove it' moments.

    • Mouthful on 10/06/2017 - 10:12

      Something to thing about. I enjoy my work, but I also love the freedom of not having any major liability, so haven't been thinking too much about job security. No problems with security at the moment, but I guess it will change my risk profile when it comes to new opportunites.

  • tsunamisurfer on 07/06/2017 - 23:15
    +9

    140k = around $97k net.

    Thats about $8k net per month, so $3k / month mortgage does not sound that bad.

    However, you need to consider interest will only go up from here. It is not inconceivable that your mortgage payments could go up to $4k / month. That will push you into a more dangerous territory but hardly the precipice.

    As long as you take the necessary precautions, you should be OK, they being :

    • Put away money (put savings into offset account). Should you lose your job for some time this covers you.
    • Consider insurance like income protection should the worst happen. Can be the cheap options like 3 months waiting for 2 years of payments.
    • Plan ahead. If a wife / child is on its way, plan finances.
    • Mouthful on 10/06/2017 - 10:33

      Thanks for the comment and all the suggestions

      I made a mistake, I should break down my salary.

      110k base
      11k super
      bonus in September (around 20k)

      so monthly once all the pre-tax stuff gets taken out (student debt, concessional contribution etc) i take home ~$6k
      less $670 a month for my car lease

      a 25 year 600k mortgage at 5% is roughly $3500 a month

      5900-
      700-
      3500-
      leaves me about 1700 a month to live on for saving, food, fuel, phone, internet, entertainment. This seems doable. even it were to go to 4k, 1200 is probably enough.

      The bonus I'd always like keep out of the equation as it is not always guaranteed and I'd use that towards investment/saving (this bonus though I am to finish my car loan).

      Will look into insurance just in case. No wife or child on the horizon!

      • tsunamisurfer on 10/06/2017 - 19:03

        If your monthly take-home is $6000 with a $700 / month car lease, that changes things significantly.

        Lets assume throughout the life of the mortgage the repayments are around $3500 / month (note thats being conservative). If you really have $1700 / month for all bills, I would put it to you that that is just enough for a single. But within 25 years there could be marriage / child(ren), unemployment, sickness and maybe holidays.

        Personally this is cutting it too close for me.

        The one saving grace is the bonus which is a major boost, but as many who have bonuses know that they can change or be removed in some cases.

        Do your sums, find a career minded girlfriend, try to avoid additional concessional contributions if you have a mortgage.

  • John Kimble on 07/06/2017 - 23:31

    One of the main issues/stresses for families is money and lack thereof. I stress a bit just because I'm a saver and my wife is a spender. We also bought a place close to our max limit, with a bigger than we initially thought special levy due (rookie error). On top of this, wife was recently on maternity leave, so we were on 1 income for a while!

    Some pay that (or more) in rent and don't get property in the end!

    Didn't they get rid or reduce stamp duty for first home owners? That would help a bit?

    My tips:

    • Ensure to get your own building inspection done so there aren't any major issues/special levies hidden on the horizon.

    • Obviously try and buy a place you like, you will be living in it for the foreseeable future.

    • Try and suss out neighbours…a bit hard as they will be on their best behaviour you would assume, but you will be living near them.

    • Ensure you've done all the necessary calculations (hire an account or financial planner if you really need to) and precautions as tsunamisurfer mentioned. Don't forget council rates/utilities/maintenance costs, possible reno costs, strata (if a unit), new furniture, transport to work costs from the new place etc

    • Mouthful on 10/06/2017 - 10:37

      Thanks for the advice, all those points are good. Definitely the first home buyers will help. Only problem is that prices will probably increase by a similar amount :(

      I think i'm going to need build a model to factor in all the incidentals, so I can just input the property price + strata/council and it spits out how much my net savings would be.

  • AppleLime on 08/06/2017 - 00:52
    -1

    My advice is if you have parental help get them to loan you. You don't have to pay interest to the bank. Mortgage is very stress. We had mortgage for 1 year and kids had to suffer. Practically no life so that's it! No more loan from the bank!

    • tsunamisurfer on 08/06/2017 - 23:08
      +3

      Having parents step in is helpful but unrealistic.

      Seriously, if you had 'no life' at year 1 of a 25 year mortgage on historically low interest rates, you likely had no business having a mortgage.

      • Mouthful on 10/06/2017 - 10:49

        My parents themselves have a mortgage to service unfortunately.

  • Savas on 08/06/2017 - 01:16
    -6

    Rule 1 of OzBargain is to never borrow money

    • mskeggs on 08/06/2017 - 10:23
      +4

      I don't think that is true at all for a home.
      And leverage in investments can be sensible if the asset price is low.
      It's just buying Sydney real estate at the current stupidly unsustainable prices that is the issue.

      • Mouthful on 10/06/2017 - 10:50

        Exactly. Even on a decent salary, not finding it easy to commit and buy a place.

  • Nugs on 08/06/2017 - 06:39

    I always run the 'what if interest rates are 15%' scenario (per 1990).

    • mskeggs on 08/06/2017 - 10:24

      That would bankrupt everyone who has bought a house in Sydney or Melbourne in the last 5 years, so you will have the government moving heaven and hell to avoid it.
      That said, 7 or 8% rates are very likely over the long time frame of a mortgage.

  • EightImmortals on 08/06/2017 - 10:14
    +1

    "Any advice for a first home buyer who feels like his missed the boat on property in Sydney?"

    1)Wait for the crash then look again (yes it will happen, and in the next couple of years IMO)
    2) Debt=slavery if you can pay it off quickly then go for it, it you will be encumbered for the next 20-30 years then have a think about whether you love you job 'that' much and if it it worth it just to deal with the EMOTION of 'feeling like you've missed the boat'?
    3)Real estate is great but like all markets it moves in cycles and for the average home owner it turns into a zero sum game if you're lucky. Here's what I mean, by the time you pay interest and all the other BS charges associated with eventually owning your home you have paid 2-3 time what the home actually cost at the time of purchase. Now in the meantime RE prices have risen to the point where your 600K house is worth 1.5M (if you're lucky). But as you've spent that much in interest anyway you have not gotten ahead. Of course if you are lucky and bought at the bottom the boom and in the right location then you 'can' do quite well.
    4) If you just want a place to live and don't care about 'Money as debt' (google it), boom and bust cycles or sticking out a job that you hate because you are chained to a mortgage then go for it. Some people can do that, I'm not one of them. And yes, rent is dead money, but so is interest, at least with rent you can move on if things go pear-shaped and you will recover. If you can't service your mortgage then banksters will sell off your house and you'll have to pay the difference and be left with nothing.
    5) Have a nice day. :)

    • mskeggs on 08/06/2017 - 10:25
      +10

      6) Consider if Sydney is a useful place to live, with the increasing over crowding and absurd house costs.

    • Mouthful on 10/06/2017 - 10:55

      Wow thanks, I secretly agree with you on all the points, but feel some pressure to buy a place and settle down.

      To add to this I think a lot of the recent wave of consumption has been fuelled by the the on-paper increases in property.. people "feeling" rich but little wage growth.. Do you think we'll have a pullback in spending now that the property prices are slowing down to point of recession? Thoughts on automation wave?

      • EightImmortals on 10/06/2017 - 17:52

        There are a lot of things happening locally and globally that can play into it and most of those things are uncertain. All I know right now is that aussie property is overpriced, wages are stagnant or going backwards (in real terms) as for some reason housing is not included in inflation figures to inflation is worse that it seems. We have the highest private debt in the world and apart from mining and housing there is nothing of real substance to drive the economy, and housing is in a giant bubble. The "Big4" banksters are about 18 trillion down the derivatives hole which is another giant bubble waiting to pop. We sold all our property about 3 years ago (might have jumped the gun a bit :) ). There are other reasons but that's enough for me to hold off any more property for now. So like I said if you can get in and pay it off quickly or buy outright you'll likely whether any storm though it might take a while to recover your losses. And don't forget the two main drivers of all markets: fear and greed, fear of 'missing out' can cause people to make emotional decisions/mistakes and greed will keep people holding on on the belief that property (or any other market)will rise forever without any corrections. Be patient, try to get a handle on the bigger picture, look further afield than Sydney, research the Unit property glut currently being experiences in a number of our cities.

        Some reading for you.

        https://www.domain.com.au/news/five-graphs-that-show-why-aus…

        Automation wave as in smart gadgets?

        They don;t really interest me as the more complicated things get the more things can go wrong and be interfered with. But each to their own on that one. If you want to send emails to your fridge then who am I to say otherwise. :)

  • cupcake on 08/06/2017 - 16:47
    +2

    Good income so start saving more. Cut out booze, cigarettes, gambling and avocados.

    You should have bought a place 10 years ago. Good luck.

    • modsec802 on 10/06/2017 - 05:25
      +1

      You should have bought a place 10 years ago. Good luck.

      Yes, 22 year olds should have bought at 12

      18 year olds should have bought at 8

      Even current toddlers should have bought before they were conceived

    • Mouthful on 10/06/2017 - 10:57

      NOT THE AVACODOOSSSSS!!! DW I buy my avocados on special at woolies. Drink sometimes, eat out quite a bit (i guess that's my vice).

      If only!

  • OhNoUShiz on 08/06/2017 - 17:29
    +5

    140k pa is considered higher end income.

  • redfox1200 on 09/06/2017 - 16:06
    +1

    most people on ozbargain are on a good salary of 180k+, so we don't get stressed about our mortgages

  • whooah1979 on 10/06/2017 - 10:50
    +1

    $140k pa. you'll be fine.

  • dasher86 on 11/06/2017 - 20:56

    Get rid of the car lease and get a second hand vehicle out right.

    • Mouthful on 12/06/2017 - 09:41

      Whilst this would help, I'll have the car paid off within the year, It is an expensive car, but I pushed the dealer hard and got it for around 30k less than sticker.

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