Affording Mortgage - Estimating Affordability and Household Savings - Family of 5

Lfranklowe23 on 20/07/2024 - 22:48
Last edited 21/07/2024 - 12:03 by 1 other user

Hey OzBargainers,

Planning to take on a large mortgage ($1.69m / 53% of net income) and currently working on the family budget to make sure this can be done without too many issues. Noting that my circumstances are way better than many Australians out there doing it really tough, I would still appreciate other experience and wisdom in such matters.

At the moment we spend quite a bit, as we aren't paying a mortgage, and I'm trying to see where we can reasonably cut back.

Situation is as follows:

  • Family - 2 Adults - 3 Kids (at public schools and under all under 11yrs)
  • Income (net): $9100/fn ($236,600/yr)
  • Mortgage (proposed) $4850/fn ($126,100/yr)
  • Remainder (for saving / spending): $4250/fn ($110,500/yr)

Given we are spending more than $4250/fn now, do 5-people families currently working to a budget think this is a workable number for their circumstances (my feelings are this works ok). We like the odd holiday, driving locally and wouldn't mind a simple OS holiday every few years.

For reference I calculate our current expenditure to be approximately as follows:

  • Supermarket Food: $630/fn (almost no eating out)
  • Car Costs (petrol,parking,basic services): $480/fn
  • Insurances (house,car,health etc): $426/fn
  • Utilities (gas,elec,internet,phones): $250/fn
  • Medical: $150/fn
  • School: $70/fn
  • Pets: $70/fn
  • Holidays: $230/fn
  • Kids Care (before/afterschool): $240/fn
  • Coffee: $60/fn
  • Sub Total: $2560/fn
  • Other (clothes, household items, presents etc): $1820/fn

I feel this other category at $1820/fn can take some serious trimming without us suffering too much, but wanted to get a gauge on what others are spending in similar circumstances.

For those out there, how does this compare with similar composition families? Are my numbers way out with yours? Does this other category sound excessive?

Finally does a mortgage @ 53% of net income compare reasonably with others out there in similar situations?

Financial Home Loan Loan

Comments

  • Hybroid on 20/07/2024 - 23:04
    +68

    You make enough money to get some professional financial advice. Other random peoples' subjective views and personal spend is not relevant to your case whatsoever. Different people have different priorities and desires.

    • franklowe23 on 21/07/2024 - 07:59
      +26

      Professional advice is indeed important and I have sought that already, but it doesn't cover everything and is much more focused on text book results, rather than lived experiences.

      What I was really looking for here was other people's lived experiences to pair with the existing professional advice.

      • mrtin on 21/07/2024 - 08:24

        Financial advisers will have seen so many different people out there and should be able to share with you more lived experiences than everyday people.
        You didn't like the text book results / the crunched numbers?

        • franklowe23 on 21/07/2024 - 08:49
          +4

          The crunched numbers say it is ok, but I'm naturally skeptical of everything I'm told, so don't necessarily believe them.

          Plus if they are using 2-yr old assumptions with the cost of living having skyrocketed they will be well and truly out.

        • May4th on 21/07/2024 - 11:03
          +45

          financial planners unlikely to be helpful for budgeting. they are rarely helpful full stop for most people and I would argue financial self education and forums like this is much more helpful than your average FP

          • franklowe23 on 21/07/2024 - 12:30
            +3

            @May4th: Couldn't agree more

          • soulblighter on 22/07/2024 - 09:43
            +9

            @May4th: this^

            financial planners are baboons, I have never seen one and never will - peaceful without them and they're your average 13yr old tik-tok brains disguised as a planner.

            If I were you, I wouldn't take the $1.69m mortgage (you're locked in with no option to cut back here) unless you love the public school they're in and don't want to move areas / postcodes.

            give your kids time rather than working your arse off for the rest of your lives trying to pay the bills/huge mortgage etc.

            and invest in index funds (for 3 of them) and gift them when you think they're ready. I started when my daughter was born, should be a nice chunk

            • sauce2k on 22/07/2024 - 11:39
              +3

              @soulblighter: I'm going to swim against the current here. I work in the industry (not as a financial planner), and I disagree that financial planners (FPs) are useless. The ones that are useless and dodgy are almost out of the industry due to the Royal Commission, education requirements (which is unfortunate in some ways, as many experienced but older advisers were pushed out), and industry watchdogs.

              Sure, if you're young and just starting out, there's no real point in seeing one. But if you're in OP's position, getting financial advice can be beneficial compared to relying solely on online advice. Index funds are great, but they're not a solution for everything.

              FPs have a bad reputation, but I would say this is the best time to get financial advice for the reasons mentioned above.

              *this is not a financial advice

              • samfisher5986 on 22/07/2024 - 11:46

                @sauce2k: I'm no expert but doesn't a financially planner have the same flaw as all other professionals that assist people?

                It all comes down to their personal opinions/experiences which generation they are from.

                I don't doubt there are some great people out there but it doesn't seem worth trying to find someone worth their money.

                • sauce2k on 22/07/2024 - 11:53
                  +1

                  @samfisher5986: You are absolutely right—each financial planner will have their own investment philosophy and personal beliefs. What's important is to ask them and see if it aligns with yours. For example, an adviser who believes in active management vs. your preference for passive investing isn't going to be a good fit.

                  Referrals are important in this industry. Ask around and read reviews on sites like Adviser Ratings.

                  Each to their own—some people don't believe in financial advice, but others do. I find it very useful for retirees, especially in maximising their benefits. Rules change all the time, and it can get complicated.

                  • samfisher5986 on 22/07/2024 - 12:03

                    @sauce2k: Your average retiree probably barely uses the internet outside of Facebook and gets their financial information from the TV, seeing literally anyone for assistance is probably a positive result.

                    For everyone else I think its harder to know.

              • franklowe23 on 22/07/2024 - 21:22

                @sauce2k: I've seen an excellent financial planner, but they aren't for everyone and we just used them as a one-off consultation as we usually manage everything ourselves (for good or bad).

            • franklowe23 on 22/07/2024 - 21:20

              @soulblighter: I think the giving time to the kids is very important so really agree with that sentiment.

              Work is a time drain, not doubt about it, but regardless even if we kept renting we are realistically going to keep working as hard as we do now as renting in Australia does not provide tenants with certainty against anything.

              I also think teaching kids about investing is a really good skill to pass on - teaching to take on huge home loans, probably not a great skill, but there you go.

              • soulblighter on 23/07/2024 - 17:29

                @franklowe23: Yeah definitely don't keep renting, I wasn't suggesting that renting (it's stressful), buying a family home gives you peace, stability + lets you do things your way @ your place.

            • greatlamp on 23/07/2024 - 15:00
              -2

              @soulblighter: So instead of tax free capital gains on a leveraged investment with the cheapest finance available, they would be receiving taxed capital gains on what amounts to their home deposit, while continuing to pay rent that increases every year.

              This is not good financial advice, this is trying to outsmart the market. I doubt you follow this advice yourself.

              • soulblighter on 23/07/2024 - 15:20

                @greatlamp: I didn't mention about rent, nor am I telling the OP to rent. Just saying not to go for a $1.69m if it can be avoided.
                I guess you don't read posts, only financial planners "think" they can outsmart the market but fall flat on their face, I ain't a financial planner, so

            • metallum on 23/07/2024 - 17:00
              -1

              @soulblighter: "Never seen one never will" Never trust someone who has no experience in that which they speak.

              • soulblighter on 23/07/2024 - 17:06

                @metallum: I don't have experience in losing a lot of money nor guiding someone down that path. Rightly said, never trust a financial advisor :)

                Sure, one learns by making mistakes, but not "grand" mistakes - that's called gambling and I'll leave that to the financial advisors.

                I don't get commission by advising a fellow human, my advice is free. You know what a financial advisor does, don't you? They always make money regardless of the client's interests, they're like the bank/broker. Whether the client makes money or not, they do!

                Anyone with common sense knows who stands to gain, so, thank you!

  • Trying2SaveABuck on 20/07/2024 - 23:05
    +7

    how does this compare with similar composition families?
    Are my numbers way out with yours?

    No idea but we spend at least +10k pa on entertainment ie travel, going to movies, shows, playcenters, weekends away, kids sports/music, Netflix etc

    personally doesnt look like you have facted that in but it might not apply to you as much as it does my family

    Does this other category sound excessive?

    it is a big loan - you need to factor in the 'cost' of maintaining a property ie gardening, maintaince, any renos or changes you might make etc

    it is expensive owning a home assuming you're not a tradesman and cant fix most things yourself dont underestimate the cost of 'own' a property

    • franklowe23 on 21/07/2024 - 08:03

      Yes we have a lot of parties and kids sport and that certainly adds up.

      I've allocated the following future numbers that need to come out of the $110,500/yr that would remain post mortgage for house stuff:
      - Rates: $7k/yr
      - House Repairs (no reno's): $6k/yr

      But I could be well short on the house repair allocation as I've never owned a home before.

      • freefall101 on 21/07/2024 - 10:38
        +6

        $6k on the house in the first year is very optimistic and very dependent on the house. I think I spent that in the first month after moving in pretty easily. The removalists, cleaning and such add up to needing either time or money too. Even things like taking the chance to replace old with new, throwing out and rebuying food, extra bits of furniture if you're upsizing. The key thing is to have an extra $20-30k set aside.

        Also need to account for stuff like water rates (you now get the joy of paying for sewerage). Your utilities overall seem a bit low, but it depends what you're buying, If you're buying an apartment it's fine, if it's a big ol' draughty 1970s house (like I did) the power bill goes up a lot in winter.

        I'd also break down your "other" quite a bit further. It's almost half of your spending outside of your loan.

        • franklowe23 on 21/07/2024 - 12:36
          +1

          Yes totally agree, moving costs, buying additional furniture and other additional stuff will easily come to $20k+, but hopefully that will be one-off costs and not ongoing.

          I've accounted for water rates (based on what the landlord pays for us renting) and we are moving from one old 1950's house to another, albeit it bigger 1960's house. The current one has insulation, the one we'd purchase not so much. No idea how much extra that is going to cost us to heat, but it could easily be an extra $1000pa.

        • Nebargains on 22/07/2024 - 23:20
          +1

          6k in any year on house repairs and whatever in any year is nuts let alone the first year.

          If you budget that you are going to have heaps left over every year, good to plan for it and not need it but most years you will spend very little if anything on repairs etc.

          Personally this year I have spent like $510 on repairs, last year I probably spent nothing? In fact most years I have comfortably bugger all.

          • freefall101 on 22/07/2024 - 23:38
            +1

            @Nebargains:

            6k in any year on house repairs and whatever in any year is nuts let alone the first year.

            Why do you think the first year would the least amount you spend? Unless the people who lived there before kept it in pristine condition, it's the year you spend the most fixing the stuff they didn't care about.

            Years afterwards, sure. But first year I went to town fixing stuff. And that's not including improvements like the old owners not putting solar in.

          • franklowe23 on 23/07/2024 - 13:33

            @Nebargains: That would be a fantastic outcome!!

  • MS Paint on 20/07/2024 - 23:12

    What are you currently spending on rent?

    Council rates will get pretty high.

    • franklowe23 on 21/07/2024 - 08:03

      Way less on rent, but I've excluded it from all the numbers (as you can see) as it won't be relevant going forward.

      • MS Paint on 21/07/2024 - 10:40

        Understood. Just thought if you're paying, for example, $3600pm in rent then shaving another $300pw from outgoings should be doable.

        If you're currently,for example, paying $2400pm in rent then that's a huge difference.

        • franklowe23 on 21/07/2024 - 12:34
          +2

          Gottya - the increase from renting to mortgage would be a whopping $3375/fn.

          • MS Paint on 21/07/2024 - 12:35
            +15

            @franklowe23: Holy snapping duck sh!t batman. Computer says no.

            • franklowe23 on 21/07/2024 - 13:27

              @MS Paint: Yep it is a considerable difference!!!!

              • bmxr on 21/07/2024 - 22:22
                +8

                @franklowe23: It not just a considerable difference. It is too big of a difference.

                You're proposing to start out at more than 30% gross income in mortgage repayments which is defined as being in mortgage stress.

                As someone who took out a similarly sized mortgage 2 years ago, we were coming from $6k p.m. rent to what was then $6k p.m. mortgage (now $8.5k). Even then there was a noticeable change in expenditure relative to renting. Stuff you probably haven't really considered which add significantly to your your outgoings and are currently covered by your landlord.

                Some are optional if you do the work yourself (however need to account for time and materials) like gardening, pest control, painting, maintenance, etc.. Others you will need to pay for, council rates, water, home and contents insurance, all trades, appliances and fixtures, and from our experience stormwater, roof restoration, solar panel array maintenance, fence repairs, flooring… And then there is the desire to build up a buffer in the redraw or offset which we should all be doing.

                You need to temper either your expectations for the size of your mortgage that you can service, or prepare your own family for a significant reduction in discretionary spending.. dinners out, takeaway, extra curricular school activities, children's sports, holidays..

              • z0s0 on 22/07/2024 - 16:41
                -1

                @franklowe23: Yeah so maybe keep renting; it's obviously a much, much better deal for you?

                • franklowe23 on 22/07/2024 - 21:25

                  @z0s0: Rental returns in our area are terrible, I certainly wouldn't own a rental property here.

                  So yes renting is much cheaper than buying, but without the rental agreements of places like Europe (30-yr rental contracts etc), renting in Australia provides tenants very little certainty. This is something that we should change as a country.

                  • z0s0 on 24/07/2024 - 14:51

                    @franklowe23: I agree. But disliking the reality in which you live isn't a great justification for what appears to be a very poor financial decision.

                    • franklowe23 on 24/07/2024 - 20:58

                      @z0s0: Fair point! Buying is certainly not a decision that stacks up financially vs renting unless there is capital growth (a big if in my mind) it is purely for "lifestyle" reasons that one would buy.

                      Where lifestyle reasons are things like have location security, not needing to move at a landlords requirement, being able to make changes to a property and garden, not need to seek permission to keep a pet etc etc.

            • supersabroso on 22/07/2024 - 22:06
              +2

              @MS Paint: I agree with this, we have a smaller mortgage that costs 40% of our after tax income. I'm pretty comfortable with this as we only spend 40% and save the remaining 20% straight into the offset account to reduce interest payments. However, by your maths, you spend 51% of your after tax income and you need to pay 50% on your mortgage. It's not a good position for you as you'll be looking at a 30 year repayment schedule. You're better off getting something that's more within your budget if you can handle the downgrade. Try buying the same property in a cheaper suburb, eg. one without a train station can instantly cut $350k off your house price making the loan feasible.

  • Wiadro on 20/07/2024 - 23:19
    +12

    albo is that you?

  • prisonmike on 20/07/2024 - 23:31
    +1

    You are cashing in some major dough. Talk to a mortage broker.

      • sumyungguy on 20/07/2024 - 23:56
        +4

        If both earned the same salary it would be $165K each but I'm guessing one partner earns significantly more than the other.

        • sumyungguy on 21/07/2024 - 11:58
          +16

          Average salary in Australia is around $98K so please no need to humblebrag. You're in a great position to live your best life while you enjoy good health.

          • I like freestuff on 21/07/2024 - 12:49
            +1

            @sumyungguy: As OP said it isn’t crazy in today’s world. Most people in government roles would be closing in on that after 10years. I’m nearly on that after 7 years and overtime just as a cop.

            • eek on 22/07/2024 - 09:45

              @I like freestuff: Wait, you can make over $165k/yr as a cop in 10 years? Is there a particular department to go for?

              • I like freestuff on 22/07/2024 - 10:27
                +2

                @eek: If you get into traffic you get 30k a year in OT sitting in the speed cam watching movies. There is heaps of OT available doing bail checks as well but that is overnight work.

                Assuming you just go up the pay points as normal after 10 years you will be on $120k just from your base pay and the shift allowance. That is today dollars though, in 10 years time it would be up 40% from EBA raises.

                Another 5k for night work and depending on where you are posted can range from $500-10k area allowance a year.

                I made 149k last year

          • TheFreaK on 22/07/2024 - 06:12
            +1

            @sumyungguy: That’s average, median is like 70k

            • sumyungguy on 22/07/2024 - 10:39

              @TheFreaK: Yeah I know, whichever figure you use it's a fraction of OP's household income. Not that there's anything wrong with that…

          • supersabroso on 22/07/2024 - 22:50

            @sumyungguy: Exactly, a pre-tax household salary of $400k/year is crazy high! That's like in the top 2% of Australia, good work whatever you and your wife do!

        • RTX9090Ti on 21/07/2024 - 19:18
          +2

          Your income is highly sought after by the lenders so they happily charge you huge interest to fatten their waistline.

          • franklowe23 on 22/07/2024 - 21:28

            @RTX9090Ti: They'll do well. Good Shiraz for them, Aldi Shiraz for us (although I actually quite like it).

      • Drakesy on 21/07/2024 - 12:55
        +1

        *It's a net income, gross income would be closer to $300k.

      • jm7 on 21/07/2024 - 14:15
        +5

        I'd have to disagree about APS wages. Unless you're EL1+, your salary isn't amazing. VPS salaries are much better in comparison.

        • franklowe23 on 21/07/2024 - 17:51
          +3

          APS salaries are very far from amazing, for the work one does, at any level!! But that's a separate issue, one that I hope corrects in time.

          Contracts are on double the APS money (plus some) and almost the same job security - crazy situation!

          • Banj0 on 21/07/2024 - 20:01

            @franklowe23: This is like dual (federal govt) EL2 income I think? It is far from average even in ACT and the majority of people I know in my dept wouldn't be on that. EL2 and up are certainly not representative of average public servant incomes. Depts vary of course.

            Prices paid to get consultancies in are insane, but vendors/firms are taking a good chunk of that. Still, it seems that individual contractors are sometimes paid a level or two (or three) higher for expertise.

            ACT Govt pays seem to be all over the place vs federal.

        • Drakesy on 24/07/2024 - 17:41
          +1

          Even EL1 isn't amazing,

          APS is great for grads/juniors.

          Managers are getting royally reamed.

    • franklowe23 on 21/07/2024 - 08:05
      +4

      Sadly it doesn't feel like it with a family of 5, but I appreciate the sentiment and we're obviously doing much better than most (which isn't lost on me).

      Have spoken to a mortgage broker and they say it's all good, but they would say that as they want to sell loans.

      • Banj0 on 21/07/2024 - 20:07
        +1

        Have been around the industry many years ago. Never had a whole lot of respect for the majority of brokers I met, though there were some good ones.

        Your figures look reasonable, though your grocery spend looked low to me. Still…your disposable should be enough to handle this, and no doubt you can trim discretionary spending if needed.

        I would expect the bank to (at least in part) make their assessment based on standard assumed expenses for your situation. They'll certainly look over yours if that has to be provided in the application, but I believe they will check affordability also against some assumed minimum outgoings.

        • franklowe23 on 21/07/2024 - 20:21

          Thanks and yes they seem to check both against my provided figures and their own assumptions for our family makeup and location.

          I agree that trimming should indeed be possible in our circumstances.

      • cadwalader on 22/07/2024 - 14:59

        You're raising a family on 5 on a net household income of 230+k. That is some major dough.

        That said, I have a similar debt ratio that you're looking at. For net income to debt ratio I have around 6.2X while you're looking at just under 7.2. Its doable for us but savings have been cut a fair bit. Probably going to cut our international travel duration by half and we've stopped buying fun gadgets and games. Normally we do 4-5 weeks overseas annually but we're going to halve it to maintain our investment rate as we still want to FIRE.

        Your spending looks workable similar to ours but it would be better for you to have a nice cash buffer if you're buying an older property. Occasionally we find ourselves needing to spend on some repair and that eats into the cash savings that we have built up. I couldn't imagine borrowing 7X of net income though, 6.2X was as far as I was willing to go in terms of borrowing.

        • franklowe23 on 22/07/2024 - 21:34

          Thanks for your insights. Yep our DTI (net) would be 7.15 and DTI (gross) would be 4.75.

          We haven't had a OS holiday in near on 7 yrs. Can I ask how much these cost for families these days?

          We are buying an older property (very common in the ACT - no extra charge the included asbestos), so yes we will be keep in a buffer, but the plan was as an emergency buffer and to try and cover most things from our yearly income.

          • cadwalader on 22/07/2024 - 22:38
            +2

            @franklowe23: If not too many flights, a family of 5 would cost around 25-35k for 4-5 weeks depending on the location. Europe v Japan can be quite different in cost. This is comfortable but not luxurious, paying for nicer places at unique locations but just decent average places in the bigger cities where you can get a bit more out of your money with some research and budget hunting. Mainly well reviewed food places off the touristy track at the bottom end of the budget spectrum but in a nice place once every few days. Also not too many expensive tours or activities like full day skiing or sailing etc but still some of course, can massage your budget here and there depends on your priorities.

            I spent 7 weeks away but closer to home and cheaper trips this year partly out of friends/family obligation mixed in it because we hate flying. Its already blown most of my discretionary budget this year so I've had to cut back on one eating out day a week as well as only basic shops at colesworth and the local grocer. No more specialty meat or seafood until this year's budget is back in the green. Next year I might do a shorter Singapore/Malaysia trip and maybe just local travel where we can just enjoy free things in nature. I think if you have the urge to go overseas then you should be fine. Otherwise you'd be like me and need to add an additional 10-20% on top of the annual budget for other non-routine discretionary expenditure.

            I've budgeted really tightly before but right now my approach is just to track my savings every couple of months and if I am within a certain ballpark I consider my budget to be managed. This allows for certain big expenses like appliances, furniture or travel that I can just annualize to see if it fits within the budget. If you a significant amount of expenses that fall outside of routine expenditure then you need to add an additional 10-20% on top of your budget to be safer. If you're not currently a homeowner don't forget insurance and rates as well.

            I read somewhere that you have a couple hundred grand in ETF. That is great but not the most ideal if there is a slight market downturn and you need to liquidate. Hopefully it doesn't come to that. Don't really want to pay capital gains tax unnecessarily too but thats just me. Its always the small things that get to you. Having to replace the oven or a plumber comes to fix one thing and realizes several other things need to be fixed. Or you have an electrical issue and the electrician says your circuit breaker panel needs to be fixed. You find that your deck or shed is coming apart and you need to demolish or fix then you realize the code has been changed or the plans don't exist and then there is certifications and likely some earthworks.

            Not trying to scare you, just stuff that we've experienced owning an older property in the last 6 or so years. Some of it we planned and expected but some weren't we also did get a professional inspection but they don't really go beyond a visual inspection of structural and pest issues/risks.

  • johndowy on 20/07/2024 - 23:41
    +24

    I'm surprised you can get a loan for $1.69m at that kind of income. 53% of your income is going to be stressful. Definitely seems on the high end (risky side).

    • franklowe23 on 21/07/2024 - 08:10
      +2

      It is 53% of net income, about 35% of gross income, but given I can't spend gross income I prefer to work with the net income figure.

      Bank seems ok with it.

      • sumyungguy on 21/07/2024 - 13:33

        30% of gross is a commonly applied loan serviceability benchmark, but it was helpful you included net income for your scenario seeing as all other outgoings are post-tax. But as you've found, it comes down to the individual lender.

        • franklowe23 on 21/07/2024 - 17:53

          Indeed and so far the lenders seem fine with it - I just don't trust them not to put their interests first and their interests may not be my best interests.

    • Banj0 on 21/07/2024 - 20:12
      +2

      Lot's of disposable income basically. As you go higher up, you don't need to eat more or use more power or drive further etc…that income can go straight to savings or a loan, not expenses.

      Of course, if somebody came in to a lender with income like this but no evidence of savings (or equity in existing assets), you'd have to be careful lending the money. If you can't save what you'll need to put into repayments, then how would you afford the loan?

    • ThadtheChad on 22/07/2024 - 10:18

      The rule of thumb around 30% is largely intended to ensure lower income folks don't over stretch their fixed costs.

      On higher income, 53% may look substantial, but remaining 47% is substantial enough that its not worth sweating over. Hence these "rules" tend to fall apart for higher incomes.

  • JIMB0 on 21/07/2024 - 00:19
    +12

    I wouldn't do it. You'll be locked into working.

  • mskeggs on 21/07/2024 - 00:21
    +23

    It seems absurd to me that a family earning about three times the average income would struggle paying for a house just a bit above average price, but this is Australia now.
    I think your budget will be ok, but you are locking in staying in high paying jobs for many years. There won’t be much flexibility for another decade or so.

    • franklowe23 on 21/07/2024 - 08:13
      +1

      I couldn't agree more with your sentiments about Australia!!! It is insane and why we have held off so long from buying. For future generations I really want to see house prices fall vs wages so they don't end up in the same situations.

      Yes agreed we are locked into high paying jobs and no flexibility!

      Especially as kids get bigger I find it very hard to predict the future costs of them vs increases in come that may come. Super tricky without having lived it already.

      • drfuzzy on 21/07/2024 - 16:00
        +3

        You are dreaming if you think house prices will fall relative to wages.
        We live in a society full of NIMBY's who hate developers and investors who are best placed to increase housing supply.

        • franklowe23 on 21/07/2024 - 17:55
          +3

          A separate issue to my original post, but quite possibly you are right - I've been wrong about this for 20yrs+.

          However, if one extrapolates the last 40yrs of SYD house price growth and wages growth and then applies that number to the next 40yrs, I'd be interested to here how that works and if that is an Australia any of us want to live in….

          • serpserpserp on 21/07/2024 - 21:07
            +1

            @franklowe23: Money laundering overseas, then start a legitimate business, then move to Australia and use those millions to buy a place

          • ssfps on 22/07/2024 - 00:30

            @franklowe23: It works for much of europe, in the sense that people still live there despite relatively few owning a home.

            If we have a large-scale famine or cease immigration we'll likely see that 'correction' though, so we can only hope.

    • us3rnam3tak3n on 22/07/2024 - 14:27

      a house just a bit above average price

      National median house price sits just under $800k making this more than double. Even in Sydney it's 44% above median.

      • mskeggs on 22/07/2024 - 14:40

        I was making a bit of a throw away comment, based on headlines I had seen, not a careful analysis, so I just had in mind these figures:
        https://www.domain.com.au/news/domain-house-price-report-syd…

        • us3rnam3tak3n on 22/07/2024 - 14:53

          Interesting. I've not come across stratified medians before. I was referring to CoreLogic's figures.

          Maybe Domain's method is more accurate or maybe it's in their interests to give the impression that the market is growing faster than it is.

          • mskeggs on 22/07/2024 - 21:57

            @us3rnam3tak3n:

            maybe it's in their interests to give the impression that the market is growing faster than it is.

            I think you’ve hit the nail on the head.

  • boomramada on 21/07/2024 - 00:26
    +2

    a mortgage @ 53% of net income

    Good luck, did bank said no?

    • franklowe23 on 21/07/2024 - 08:14
      +3

      Bank says yes no worries. It is 53% of net income or about 35% of gross income.

      • Nugs on 21/07/2024 - 10:07
        +2

        can you afford it if interest rates hit 10% though?
        .

        • franklowe23 on 21/07/2024 - 12:39
          +2

          Depends what salaries do in that scenario. If they don't move then it would be baked-beans on white bread only, if they move in line with inflation then probably somewhere in the middle.

          We wouldn't be the only ones struggling big time if this happened(s), so a I guess a little safety with the herd.

      • CheapskateQueen on 21/07/2024 - 21:29
        +1

        honestly 35% of gross is fine, must better than most ppl that's for sure. (at least in Sydney, where being a millionaire means you own a 2 bedroom apartment that's not on a main road, 15km from the cbd)

        you've got so much discretionary spending built into your budget, that there's plenty of fat to trim if things get tough.

        but exactly how old are you? cos if you're 40, budgeting on a 30 year loan, that's tough. of course there's potential inheretence that you might be factoring in some time in the far future?

        idk, budget all you want, but you are right the real deal is tougher/more stressful.

        perhaps check whether you're borrowing at your absolute maximum capacity? if you're at the roof of what the bank will give you, id take that as a serious warning sign. if you're well below the absolute maximum, you're looking good.

        make sure though that you've got some money left over to cover major unexpected expenses

        • franklowe23 on 21/07/2024 - 21:38
          +1

          Thanks. Aust. housing is insane - no other word for it in my opinion.

          Agree I feel we can trim our discretionary spending without an issue, the question is exactly how much. My gut says we can live on $90k a year without a drama, but that is $25k saving from last years spend.

          Sadly no spring chicken: 41yrs old. Everything is budgeted for a 30yr loan, but if things go well that of course won't be needed (the same as everyone hopes as they walk headlong into a mountain of debt…). Inheritance might be there, but everyone is cracking on strong at the moment and you never know how much aged care will cost when (if) the time comes.

          We aren't actually borrowing at max capacity (apparently), but not a long way off (approx $50k).

          Noted on the emergency fund - we currently have a couple of hundred thousand as an emergency buffer (ETF's and shares - so could fluctuate wildly if the economy or world hits a submerged iceberg), less any moving costs and additional furniture (aiming to score that 2nd hand if possible).

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