Need home loan advice

[sabre_ac]

Eventually one of you will want out of the property, it might be now (for you). Depending on the tax considerations selling it might be the best outcome. Even on the best of terms, your goals will continue to diverge so make the break now.

I've had 3 (younger) clients all buy property with what became former partners. All had the idea they could retain it with sharing the loan. All of that ended when one of them ended up with a new partner and they wanted to buy a property together.

To use the equity from the home, most banks would want her financials and mortgage over both properties. Otherwise, you could look to change to tenants-in-common and split the loans.

Great advice!

I can't imagine there would be too many success stories of former partners maintaining financial ties when new relationships start to mature.

 

[Plugger46]

I posted this on a different thread but i found this which seems more applicable

I've got 24 hours before my cooling off period ends my rate will be 5.9% over 2 years my average left over per week will be around $$530-560

i work full time

I'm just unsure if $560 is doable. I obviously need money for food and other expenses like petrol and beer (lol) but i also need to save money if something goes wrong with the house or my car

Really battling with this decision. I like the idea of renting a room out but i thing its fair enough to be picky on who. i don't want any random

Thoughts everyone?

 

[Power Raid]

I posted this on a different thread but i found this which seems more applicable

I've got 24 hours before my cooling off period ends my rate will be 5.9% over 2 years my average left over per week will be around $$530-560

i work full time

I'm just unsure if $560 is doable. I obviously need money for food and other expenses like petrol and beer (lol) but i also need to save money if something goes wrong with the house or my car

Really battling with this decision. I like the idea of renting a room out but i thing its fair enough to be picky on who. i don't want any random

Thoughts everyone?

I'm not sure how old you are or your family support situation but I'd say go for it.

Getting into the housing market in Australia has been a recipe for financial success forever and I can't see the rules changing anytime soon. Yes, you will feel pain keeping your head above water for a few years but that's expected.

1) if interest rates go down, keep paying the same higher rate and you'll be in front in no time
2) if inflation continues and interest rates stay as they are (circa), you'll expect pay rises and again you're in front as your repayments stay the same but you are earning more

to keep your head above water

1) rent a room out to someone for a valid reason (ie an international student, a person moving interstate for a job etc)
2) speak to your parents and ask if they would "bail" you out if things got too hard (ie pay $50 a week in times of tough or carry the loan for 3 months in the case you lost your job). You hope to never have to take them up but it will do wonders for your mental health, knowing you have someone in your corner

oh and
1) set up an offset account
2) as soon as you can, pay 1% more than your minimum repayment
3) use the offset account to buy shares. This will boost your income by 7-8% through dividends and cost you 5.9%.

In time your home will double in price, your shares will do the same and you will wake up one day financially set, ready to look after your own family (if that's what you choose)

 

[Plugger46]

I'm not sure how old you are or your family support situation but I'd say go for it.

Getting into the housing market in Australia has been a recipe for financial success forever and I can't see the rules changing anytime soon. Yes, you will feel pain keeping your head above water for a few years but that's expected.

1) if interest rates go down, keep paying the same higher rate and you'll be in front in no time
2) if inflation continues and interest rates stay as they are (circa), you'll expect pay rises and again you're in front as your repayments stay the same but you are earning more

to keep your head above water

1) rent a room out to someone for a valid reason (ie an international student, a person moving interstate for a job etc)
2) speak to your parents and ask if they would "bail" you out if things got too hard (ie pay $50 a week in times of tough or carry the loan for 3 months in the case you lost your job). You hope to never have to take them up but it will do wonders for your mental health, knowing you have someone in your corner

oh and
1) set up an offset account
2) as soon as you can, pay 1% more than your minimum repayment
3) use the offset account to buy shares. This will boost your income by 7-8% through dividends and cost you 5.9%.

In time your home will double in price, your shares will do the same and you will wake up one day financially set, ready to look after your own family (if that's what you choose)

I'm 24 and in a relationship but we haven't been together long enough to have a full living situation.

I'm due for a pay rise come July 1st which gets me an extra $20 or so a week

I don't really know what a (min amount) on living would be. i was thinking maybe $370 but i've been told i can go lower than that

 

[Drummond]

I'm 24 and in a relationship but we haven't been together long enough to have a full living situation.

I'm due for a pay rise come July 1st which gets me an extra $20 or so a week

I don't really know what a (min amount) on living would be. i was thinking maybe $370 but i've been told i can go lower than that

You can live with spending absolutely stuff all if you are content with it. I make my lunches every day for work, have reasonably basic dinners, and if I do get takeaway I often get a meal that can last over a few meals. And I don’t feel like I’m missing anything. You can save a lot whilst still paying off a mortgage if you really set your mind to it.

 

[Nuggs Bunny]

I'm 24 and in a relationship but we haven't been together long enough to have a full living situation.

I'm due for a pay rise come July 1st which gets me an extra $20 or so a week

I don't really know what a (min amount) on living would be. i was thinking maybe $370 but i've been told i can go lower than that

Do a spreadsheet of what you think you should spend, try and do it over a year by multiplying through your weekly, monthly and yearly expenses as required. Gives you a good picture of what you spend + what annual bills you need to save for. Then go through your bank statement and see how accurate it is and adjust your spend plan or your spend habits as required.

I'd plan for yourself only at the moment. If you rent a room out (good chance you'll find someone pretty quickly at the moment) then that's extra cream to spend on beers etc.

 

[Teagueeee15]

I posted this on a different thread but i found this which seems more applicable

I've got 24 hours before my cooling off period ends my rate will be 5.9% over 2 years my average left over per week will be around $$530-560

i work full time

I'm just unsure if $560 is doable. I obviously need money for food and other expenses like petrol and beer (lol) but i also need to save money if something goes wrong with the house or my car

Really battling with this decision. I like the idea of renting a room out but i thing its fair enough to be picky on who. i don't want any random

Thoughts everyone?

Assuming this is a PPOR - what bank is it and what is your LVR?

5.9% isn’t a very competitive rate with the competition out there at the moment - possibly meaning is this a 2 year fixed rate?

You can see how you go and in 6 months, you will be able to refinance to a lower rate with another lender and there are plenty of $4k cash back offers around at the moment (ANZ, Ubank, Westpac group). After paying discahrge costs, you should end up with a $3.2k profit and a lower rate

 

[PieLebo87]

Expect another rate rise or two in the next few months.

 

[juss]

I'm not sure how old you are or your family support situation but I'd say go for it.

Getting into the housing market in Australia has been a recipe for financial success forever and I can't see the rules changing anytime soon. Yes, you will feel pain keeping your head above water for a few years but that's expected.

1) if interest rates go down, keep paying the same higher rate and you'll be in front in no time
2) if inflation continues and interest rates stay as they are (circa), you'll expect pay rises and again you're in front as your repayments stay the same but you are earning more

to keep your head above water

1) rent a room out to someone for a valid reason (ie an international student, a person moving interstate for a job etc)
2) speak to your parents and ask if they would "bail" you out if things got too hard (ie pay $50 a week in times of tough or carry the loan for 3 months in the case you lost your job). You hope to never have to take them up but it will do wonders for your mental health, knowing you have someone in your corner

oh and
1) set up an offset account
2) as soon as you can, pay 1% more than your minimum repayment
3) use the offset account to buy shares. This will boost your income by 7-8% through dividends and cost you 5.9%.

In time your home will double in price, your shares will do the same and you will wake up one day financially set, ready to look after your own family (if that's what you choose)

There is a hell of a lot of assumptions in this post.

It's a bit more complicated than that I reckon lol.

Mate the best advice I can give you Plugger46 is there isn't nearly enough info in your post for anyone to give you advice that factors in all of your circumstances.


If you're not sure if $530-560 is doable, then you haven't spent enough time on your finance position. Not to be a dick but it's a hell of a lot more complicated than "buy house and shares and they will double". While that might eventuate at a certain time with certain assets, there's a lot of in between before (if) that happens.

Unless you've got a get out of jail free rich parents to bail you out, you need to be a lot more thorough with this. This could be the difference between being in a financial hole for the next 10-20 years or getting ahead.

I'm 24 and in a relationship but we haven't been together long enough to have a full living situation.

I'm due for a pay rise come July 1st which gets me an extra $20 or so a week

I don't really know what a (min amount) on living would be. i was thinking maybe $370 but i've been told i can go lower than that

You need to do more on your predictions, and always make sure you have bank for a rainy day. What if a month in your heating/hot water unit/cooling/something else goes bust in the house? There's about 1-2 months of your surpluss weekly funds gone to replace it, if you don't have a decent emergency fund in place.

An extra $20 a week isn't significant enough to make a difference, not to mortgage repayments. The banks when making their assesments will hardly give a damn either. That's ~$1000 a year, less if that's before tax. Not even touching inflation.

A minimum amount can be as long as a piece of string depending on your lifestyle. Factor in your bare essentials over say a month of groceries spend, then divide it by 4 to get your weekly average. Do the same with your other expenses, add in all your needed amenities like phone, internet, insurances, running costs, etc. Then add 10% for inflation and a buffer, etc.

Have you found an absolute bargain buy property? If not, what's the harm in saving up some more cash, getting a wage increase and purchasing in 3 months - a year or more when you're in a better position?

 

[Seeds]

I'm not sure how old you are or your family support situation but I'd say go for it.

Getting into the housing market in Australia has been a recipe for financial success forever and I can't see the rules changing anytime soon. Yes, you will feel pain keeping your head above water for a few years but that's expected.

1) if interest rates go down, keep paying the same higher rate and you'll be in front in no time
2) if inflation continues and interest rates stay as they are (circa), you'll expect pay rises and again you're in front as your repayments stay the same but you are earning more

to keep your head above water

1) rent a room out to someone for a valid reason (ie an international student, a person moving interstate for a job etc)
2) speak to your parents and ask if they would "bail" you out if things got too hard (ie pay $50 a week in times of tough or carry the loan for 3 months in the case you lost your job). You hope to never have to take them up but it will do wonders for your mental health, knowing you have someone in your corner

oh and
1) set up an offset account
2) as soon as you can, pay 1% more than your minimum repayment
3) use the offset account to buy shares. This will boost your income by 7-8% through dividends and cost you 5.9%.

In time your home will double in price, your shares will do the same and you will wake up one day financially set, ready to look after your own family (if that's what you choose)

Um interest rates can still go up. The rba came very close to lifting them last month.

and there is a real risk of an external debt crisis in australia. Interest rates will sky rocket much further under such a scenario. Policymakers will have no choice.

 

[Power Raid]

Um interest rates can still go up. The rba came very close to lifting them last month.

and there is a real risk of an external debt crisis in australia. Interest rates will sky rocket much further under such a scenario. Policymakers will have no choice.

I hear you but I don't believe we are headed for a 1980s rate rise

I believe we are in for a century of low interest rates with only wars and supply chain shocks (war, renewable transition and covid) that will result in inflation. cheap labour from globalisation, IT / communication has been the downward driver for 4 decades and AI will be the driver ahead.

Policy makers do have a choice and that is simply not panicking over a short term issue.

 

[burge13]

I bought my house at 23 and stayed home for 2 more years while renting that out. Gave me time to save, house paid off a little more and refinanced before moving in. Is something like this an option? Its great to buy a house but $560 a week at 24 (im assuming) is a large chunk of your pay...

If your car broke down tomorrow and cost 2k to fix, how ****ed are you? Id suggest if this causes much issue id hold off buying

You wont get an appointment prior to settling but speak to an advisor, a proper one, not a mortgage broker or lender who give s**t advice

 

[Big Sauce 21]

Am I reading it as $560 will be your repayment, or that you will have $560 left after repayment ?

 

[sabre_ac]

I hear you but I don't believe we are headed for a 1980s rate rise

I believe we are in for a century of low interest rates with only wars and supply chain shocks (war, renewable transition and covid) that will result in inflation. cheap labour from globalisation, IT / communication has been the downward driver for 4 decades and AI will be the driver ahead.

Policy makers do have a choice and that is simply not panicking over a short term issue.

What is your definition of low-interest rates? I define low-interest rates as below inflation, I don't think we'll sit there for long.

I suspect the main difference between now and the 1980's is banks' willingness to work with clients, for example, when interest becomes too much they'll offer to extend the amortization or just increase the principal.

 

[Power Raid]

What is your definition of low-interest rates? I define low-interest rates as below inflation, I don't think we'll sit there for long.

I suspect the main difference between now and the 1980's is banks' willingness to work with clients, for example, when interest becomes too much they'll offer to extend the amortization or just increase the principal.

The bank rate is rarely if never below inflation.

Anything below 10%v(bank rate) is cheap given the rental return and capital gain vs the risk a bank takes on the individual.

 

[Big Sauce 21]

What are we expecting from the RBA next week after today's figures ?

 

[sabre_ac]

The bank rate is rarely if never below inflation.

Anything below 10%v(bank rate) is cheap given the rental return and capital gain vs the risk a bank takes on the individual.

In a lot of parts of the world, mortgages have been issued at rates below inflation for a number of years. Fair enough though, we're probably both on the same page that is not the normal course.

I'm curious how you get to 10%, is that a combination of house returns historically tracking a smidge above inflation (4%) + rental returns of 5%?

 

[nut]

Homestar has 5.19 variable

 

[Power Raid]

In a lot of parts of the world, mortgages have been issued at rates below inflation for a number of years. Fair enough though, we're probably both on the same page that is not the normal course.

I'm curious how you get to 10%, is that a combination of house returns historically tracking a smidge above inflation (4%) + rental returns of 5%?

the price of finance is the risk and giving anyone money at less than 10% is cheap. ie go and get a personal loan or a credit card.

then add to that cheap rate, the opportunity as the borrower to do nothing else but buy a property and lease it.......you get a nice return. If banks were smart they wouldn't just lend but demand an interest rate and a % of the upside on sale.

 

[sabre_ac]

the price of finance is the risk and giving anyone money at less than 10% is cheap. ie go and get a personal loan or a credit card.

then add to that cheap rate, the opportunity as the borrower to do nothing else but buy a property and lease it.......you get a nice return. If banks were smart they wouldn't just lend but demand an interest rate and a % of the upside on sale.

Aren't you missing collateral in that logic, personal loans/credit cards don't have an asset backing them?

I agree with you that a % of the sale is a good idea, lowering interest rates on lending but then a part of the profits could be a product in the future.

 

[Power Raid]

Aren't you missing collateral in that logic, personal loans/credit cards don't have an asset backing them?

I agree with you that a % of the sale is a good idea, lowering interest rates on lending but then a part of the profits could be a product in the future.

agree but even unsecured loans are "backed" by the assets of the individual. sure they don't have a fixed security but it is effectively a floating security.

I just share the view of paul keating that bank loans are cheap, cheap compared to the risk banks take on individuals

 

[sabre_ac]

agree but even unsecured loans are "backed" by the assets of the individual. sure they don't have a fixed security but it is effectively a floating security.

I just share the view of paul keating that bank loans are cheap, cheap compared to the risk banks take on individuals

Fair enough, it is an interesting way of viewing things.

 

[nobbyiscool]

First time I've ever had cause to head into the Money board!

I've recently come into a bit of a windfall - I have about a 60% deposit on an apartment I'm looking at.

Problem is I'm from a family of poor people with little history of home-ownership, so I have no idea of the process.

Are there any useful links out there? All I can find on google are banks, and you kind of get held up at the point they want to try and sell you a loan (so you can get info beyond that.)

• What's reasonable for body corp fees for an apartment in Melbourne?
• What should council rates be? The council webpage says 5% of CIV, which is "total market value of the land plus buildings and any other improvements of your property." But that's like 20k a year - that can't be right can it?
• In terms of a loan, how do you go about shopping around? Do you just go to your bank first and go from there?
• How do you go about figuring out an offer?
• If it's an apartment in a new development, will the price be pretty firm anyway?
• And first home owners grant - as far as I can tell my bank does that application for me, right?
• Also, redraw facilities - are they standard with variable loans? I have a little bit more than a 60% deposit - I could probably put another 3-5% in, but I'd really want to have a redraw facility just in case. Are they more expensive than they're worth?
• Given all the interest rate rises over the last 12 months, you'd be looking at a variable loan, correct? Or do people still recommend splitting it to insure yourself against any further rises?
• Where do I find out what insurance I need for an owner occupied apartment in a 100-apartment (new) building?

I know that's a lot, but I don't even really know where to start...

 

[Power Raid]

First time I've ever had cause to head into the Money board!

I've recently come into a bit of a windfall - I have about a 60% deposit on an apartment I'm looking at.

Problem is I'm from a family of poor people with little history of home-ownership, so I have no idea of the process.

Are there any useful links out there? All I can find on google are banks, and you kind of get held up at the point they want to try and sell you a loan (so you can get info beyond that.)

• What's reasonable for body corp fees for an apartment in Melbourne?
• What should council rates be? The council webpage says 5% of CIV, which is "total market value of the land plus buildings and any other improvements of your property." But that's like 20k a year - that can't be right can it?
• In terms of a loan, how do you go about shopping around? Do you just go to your bank first and go from there?

I would recommend a broker, even for the experienced it is usually a better deal through a broker. They can also help you with concepts such as off set accounts and assisting with paperwork.

Please don't apply for a loan (even pre approval) unless you intend on getting a loan. This works against you.

Also close you credit card or reduce it to $1k as this also works against your banking ratios. Oh and don't be tempted to get a credit card as part of the loan as this works against your ratios (even if they offer unless it is actually part of the loan.......ie netted off at the end of each month against your loan (so you're only paying 5% not 20%)

If you can just use a debit card

• How do you go about figuring out an offer?

do plenty of research in your desired areas (not the offer price, not the bank valuations or real estate vals.........go to past sales in real estate.com's sold. Work out land size, bed rooms, bathrooms, proximity to school, parks or too busy a roads etc.

Build a relationship with your broker and don't be frightened to get his opinion.

• If it's an apartment in a new development, will the price be pretty firm anyway?

I wouldn't buy off the plan or a new build. There are always issues with new builds in terms of fix and I've seen too many where the strata is linked to the builders at unfair rates.

I would buy 4-6 years old where the "actual" strata costs are better known.

Don't forget to read the strata minutes.......you find out all kinds of issues (if there are any)

• And first home owners grant - as far as I can tell my bank does that application for me, right?

speak with your broker

• Also, redraw facilities - are they standard with variable loans? I have a little bit more than a 60% deposit - I could probably put another 3-5% in, but I'd really want to have a redraw facility just in case. Are they more expensive than they're worth?

get an off set account which not only enables redraw but if managed tax deductible for other investments

speak with your broker

• Given all the interest rate rises over the last 12

• onths, you'd be looking at a variable loan, correct? Or do people still recommend splitting it to insure yourself against any further rises?

I always go variable as trying to fix is like saying "I know more than the banks about where interest rates are heading"

if you go fixed you'll be on variable within 3-5 years anyway and all you've done is paid a premium

• Where do I find out what insurance I need for an owner occupied apartment in a 100-apartment (new) building?

The strata will pay and organise the building insurance which includes all your fixtures (proper wooden floor covered - carpet and clip clap board not)

There are very few strata building insurances (thanks Oz Govt) and thus you'll see the high premiums (circa 2-4 times a home at the same value)

You may need contents insurance or rental insurance but that's cheap

I know that's a lot, but I don't even really know where to start...

Great questions and the common theme is get a broker to sort out your mortgage and tell him what you want (as the questions above are 99% of what you need to ask)

oh and I didn't answer the questions related to a state I'm not familiar with

 

[nobbyiscool]

Thanks so much for all your help there Power Raid

I guess the obvious follow up question is how do I go about getting a good mortgage broker who is working for me and not for particular banks?