I have been saving up for a house deposit, because I want to get my own house built, and stop renting.
I live in a cheap area, where I can get a decent block in town for $100K
So,
Can I buy with a small deposit, of less than 10K?
Should I get a house and land package?
How do I go about organising the whole thing?
Should I talk to a mortgage broker?
Will they be more willing to accept me if i tell them I plan on renting out the spare rooms?
Would my income of about 3K per month be sufficient for a roughly 400-500K total cost?
Would I have to start paying mortgage as soon as construction starts? Or can it be deferred until I can actually move in and stop renting?
Any other advice, or a general run-down of the process?
Thanks!
How to Buy a House?
nuttapillar on 18/03/2022 - 13:10
Comments
It is around 50K. My latest prediction is that I will end up on about 52K this year, before tax.
So on $838/week take home, you think you can afford repayments around $364/week on a $400k borrow?
Bear in mind there's insurance, bills, rates etc etc to pay
@spackbace: What if OP has an unexpected emergency? An injury at work? Damage to the home? An income of $3000/month after tax doesn't leave much room to manoeuvre if hit by unforeseeable circumstances when you still have to account for living expenses.
Would my income of about 3K per month
3 x 12 <> 50
This is also a little dependent on your circumstances. I know someone who makes about 53k a year trying to refinance last year, borrowing around 400k but with LVR of 70%, some lenders didn't even want to talk to him. I think he eventually found one that wanted to do it.
@geek001: Lucky to find one. But if only 280k of debt and they can take him on for 30 years, probs not too bad.
6-7 years ago i got away with about 400k with a similar income, no dependants, $0 debt (ie car bought outright, no credit cards). they also look at how stable your job is
At the time there were more grants for building so i bought land and built house (i got land cheaper as someone pulled out as i walked into the office) ; also older houses seemed less house for your buck and may have asbestos in them ( a concern of mine), and beggars cant be choosers
I'd say talk to mortgage brokers, some were pretty rude and didnt give a crap about a "poor" guy - I litterally had someone jump up from their desk and angrily ask me to leave i'm not sure why.
nobody asked me if i was going to rent out, i dont think they care or that would weigh much
you start paying as soon as you purchase something, so you have to factor in rent+repayments and probably just eat pasta and rice for a few months (I dont have a social life and just work).
I cant remember the run down precisely, but I wished I had done it sooner, dont listen to all the neigh-sayers giving all sorts of excuses to wait. You cant swim if you dont get in the water. Even if these guys are on ozbargain their lifestyles seem pretty luscious, if you are ready to make asian grandmothers look spendthrift and go through that hardship do it.
nowadays i've paid down about 40-50% of the mortgage since my income has increased*i did talk to banks in person quite a bit
** i did a lot of overtime and nights to reach 20%deposit to maximise whatever it was being waived
*** i probably am a workaholic, depression can be a thing especially if rates push those repayments up
Banks will lend a maximum of 7 on a debt-to-income ratio, this includes your credit card/s, BNPL, personal loans, car loans etc.
Assuming you have zero debt/credit limits, then based on your income you can borrow $300k maximum.
@ribze1: Yeah, I earned close to 70k before tax and Bankwest told me I could borrow about 320k max.
This was like 4-5 years ago though.
Lol what, holy crap, no wonder everyone is mortgage stressed to the eyeballs.
there'll be mass suicides once interest climbs…
I'm sure property developers are rubbing their hands with glee with people (such as OP) so keen to buy.
Well, one point is OP plans additional income from renting rooms. Unfortunately this is real income but the bank will not count it. They only consider rental of the whole property.
Net effect is the same, but OP was seeking information, and this contributes to their knowledge, in case their future income is greater.
$3k a month is not going to get you much i'm afraid, after expenses i'd say you wouldn't have much to spare unless you're reaallllly frugal
Add to that the inevitable rate rises, which for you wwon't be a huge impact but an impact nonetheless.Just buying land won't get the bank's attention, they'll need to know if you're going to build/when you're going to build.
Would my income of about 3K per month be sufficient for a roughly 400-500K total cost?
I do hope you're kidding
Depends what he's renting the rooms out for ;)
Renting them out by the hour?Well I'd go for a 4 bedroom house. Assuming I rent out 3 bedroom at $150 per week each, that's an extra 1800 per month, before tax.
But I'd probably rent out 2, and keep one spare. so 1200 per month.This might be a generous assumption. You've noted elsewhere you're in Murray Bridge SA - a quick search shows I can rent an entire house in the centre of town for under $300/wk. That doesn't make $150/wk for one room with three other people sound very attractive.
The bank is not going to look at it(the rent income) if it's only for sharehouse…
i dont think you can look at it as a fixed income but more as a bonus, unless that is dirt cheap in your area, those rooms will be empty several weeks a year
…and with a handful of happy endings in the rooms - I reckon there is potential here.
It is possible. Parent providing guarantor of40 - 50% of the total cost
That can only help with deposit / equity and not with servicing the loan which is based ONLY on borrowers income.
With your current income unless you've got $400k in the bank I would say don't bother.
OP is in SA, not NSW.
You're not buying a house if you're earning 3K a month; even renting is a stretch with that sort of income when you factor in food and everything else especially if you're not living alone.
Don't even bother going to a mortgage broker or the bank at this stage.
Talk to your family if they can help you out with a deposit. And if you don't have one already, find a partner that has a job.
Also increase your income.I read this comment and decided to increase my income too, thank you!
I forgot we could do that.
I was going to say rob a bank .
But they have no money in them nowadays .
And usually it’s the banks doing the robbing nowadays too
Always.
Speak to a mortgage broker or financial advisor.
Or use google to see how mortgages work in Australia and then use an online mortgage calculator to see what mortgage amount can be borrowed, but again this needs the use of google.
I've used a few calculators, and the concensus is that I can borrow 300-400K.
you must have put in the wrong data
Not sure what calculator you used but my first bank told me I could borrow up to $420K and my income was $100K per year at the time
@lunartemis: I went to CBA earlier this year and they said I can borrow up to 500k on less than 80k. I had been working for 1 month on a contract position.
@[Deactivated]: Do you have dependents? It must be because I am the only one bringing home the money..
Correction: I think I underestimated earnings. It's somewhere between 3200-3500 per month. AFTER tax.
Sorry mate, that doesn't help much at all
Doesn't sound like stable income either if there is a monthly income range
Most people working in retail/hospitality gets paid per hour, and can have an income range.
Usually a minimum income (set hours) and then some extra overtime or if they snag extra shifts. Banks probably will only consider their set hours though, since the rest is not guaranteed. I suppose caveats may apply.
Sorry not helping your cause.
That much after tax you'll need a fairly big deposit for a bank to even consider you.
OP pls don't be one of those that are screaming silently trying to pay off their mortgage.
For the love of god please put 10-20% deposit down & have extra cash to spare - otherwise you just can't afford it at this point in time.
I've seen pensioners at the bank recently pay $50 into their mortgage because they taught max leveraging themselves was a good idea - they are forever cucked to say the least and won't ever fully pay it off, and so are their children who they will pass this debt onto.
Get your finances handled, be on top of AU economics & how they work before you entrap yourself for the rest of your life.
Ask yourself - if RBA interest rates increase - how does that affect my mortgage?
Please.
Good points for OP here
Also in the same boat
tell them to sell and downsize?
I'm not that old but yeah i was taught that "american" max leveraging philosophy, unfortunately i like securityHaven't house prices skyrocketted though? They could just sell right now and pocket the difference..
You don't pass down debt though?
When I look at 380K houses on real estate, the home loan calculator shows 1300 per month, which I can easily afford. Especially so, if I'm renting out the spare rooms.
Especially so, if I'm renting out the spare rooms.
Bank won't care unless they're on the mortgage
that's with historic low interest rates
i recall there being a lending criteria of no more than 1/3 take home pay
.
Go to your bank and book a free session with mortgage/home loan consultant. They'll talk you through it all. This is the best option to build up your knowledge.
^ Agree, their advice is also free, but posting in OzB is a lot quicker.
You can also ask questions that show you did no investigation and then expect people to answer them.
And also impartial
i was in his shoes a few years ago and did just that, the banks just want to push you to take a loan with them, but in fairness, some did explain the lingo and what they liked and didnt like fairly well (and i needed it repeated to me to sink in)
for example, i thought buying a run down place and renovating it was a good idea, well apparently in australia it isnt
Why do you think buying a run down place and renovating is not a good idea? I'm thinking of doing that. What is a better alternative?
@retailsaver: i thought it was but visiting banks they all strongly disagree with that idea, probably because people never finish the job
@juki: That's strange, I wonder if the banks have something to gain by recommending against this. Perhaps trying to get the loan applicant to borrow more to purchase a house that does not require renovations?
@retailsaver: Maybe it being their security, if they need to sell it they'd have an easier time selling a finished home
@retailsaver: by renovation i think they meant more than a coat of paint and new flooring, i didnt/cant remember all the details
@retailsaver: The cost of properties needing full reno in Australia are laughably close to the cost of a serviceable property, particularly at the lower end of the market.
Given the current interest rate outlook you should assume an interest rate of (at least) 4% pa. That would mean repayments of about $1,800 pm
Speak to a banker or mortgage broker & get a borrowing capacity assessment. I think you can borrow 300k or so.
Would my income of about 3K per month be sufficient for a roughly 400-500K total cost?
I put your income into a major bank's online borrowing capacity calculator.
I gave me the following error message, "Thank you for your enquiry with <bank name removed>, your IP address has been blocked for wasting our bandwidth".
Also bear in mind that I'm pretty good at budgeting etc. I spend very little on food, and dont regularly buy much else. I can get by with barely spending anything.
Then use that skill to save up for a decent deposit?
Also bear in mind that I'm pretty good at budgeting
Your lender won't care about that.
Yes, lenders can't take that into account. Due to the responsible lending laws, I think there is a max repayment based on your income, even though you may lead a frugal lifestyle.
yep, because circumstances may change… like a broken record "past performance is not necessarily indicative of future performance"
That's what everyone says… until they ask for three months of statements… which you should really tidy up or be able to demonstrate before you lodge a serious application.
Bank SA borrowing power calculator says I can borrow 400K
Take up Hybroid's advice and actually book a consultant with your local bank. Then sit down face-to-face to discuss your options.
Bringing logic to the conversation once more :)
What's this logic business?
Get a loan from the local bikies. Get worse in debt. Run drugs. Prison for free housing. Profit!
Phone them and ask for the application paperwork to go with them.
Also, when I look at home builder websites, they say they will do it for a deposit of like $1000 sometimes. If banks require like 20%, then how can the home builders do it for $1000? Do they cover the difference and you owe them later?
If it's house and land , then that usually is the cost to sign the contract (so they don't offer the block to someone else). You'd still need to come up with the loan.
Call the home builder and say you want to build with them and see what they say.
Bank - pay 20% now, pay back the other 80% via a loan for over 10 to 30 years
Builder - pay $1,000 now, pay back the other $499,000 when its built in a year…
Bank - pay 20% now, pay back the other 144% via a loan for over 10 to 30 years
A year? Tell him he's dreaming
technically the construction cost will be spilt into invoice phases that align with the timeline of the build.
That’s the deposit they need to start talking with them and drawing up plans etc. eventually you get to the stage where they give you a bank pack and you need to go get the rest of the money to actually commence building otherwise you’ve paid the builder a couple of grand to draw up plans and make selections and get soil tested and receive the final quote to take to the bank to borrow.
Perhaps buy the land first it will increase in value and you only have to pay rates annually. Find out how much the rates are. Focus on paying off the land.
Doesn't OP need somewhere to live? Hope they like camping.
(Hi Pam)
he dosnt have the income for a large loan
No. Sorry it's not worth answering the other questions because of this one.