What To Do with $60k While Saving for a House Deposit?

sweepy on 10/01/2017 - 20:11

Hey Ozbargainers.

As the subject suggests, I've come into abit of cash. The plan is to put it towards a house deposit. I figure I need about $120k for a house deposit and I will probably reach that level of savings about mid next year.

The question is, what should I do with the cash in the mean time? The most obvious thing to do is to stick it into a savings account and at least earn a little interest on it while I keep saving towards a deposit.

However, I imagine there may be better ways of making the money work for me in the mean time. Not really sure about buying shares or investing in some sort of low fee fund? Wondering if anyone has any other ideas/suggestions and if anyone else is in a similar position?

Thanks!

Financial

Comments

  • modsec802 on 10/01/2017 - 20:19
    +8

    Unless you're investing for at least 5-7 years then I'd avoid shares: too much short term volatility.

    If you need your savings mid next year I'd look around for a term deposit: the rates suck but they're safe. If you have a partner with a lower marginal tax rate put the deposit in his/her name (if you trust him/her that is)

    • sweepy on 10/01/2017 - 20:24
      +16

      Thanks. A colleague told me the same thing today. My partner is on a lower tax rate however, we've only been going out for a year so might be safer in my name for now :)

      • SeVeN11 on 12/01/2017 - 23:21
        +10

        If your parents or sibling (i.e. somebody you explicitly trust) have a mortgage. You could 'lend' it to them as their mortgage rate would likely be around 4% and your savings account will be around 3%.

        This way you can split the difference. i.e. charge them 3.5%, you get 0.5% more and they pay 0.5% less.

        • virhlpool on 13/01/2017 - 15:42
          +3

          I know it is a good opportunity but doesn't make someone richer by much. 0.5% is barely $500 on $100k (which is a huge sum).

        • Kangal on 14/01/2017 - 07:23
          +4

          @virhlpool:
          That's sort of the wrong way to go about it.
          Like you would put it full into your mum's mortgage, and take out the full amount next year.
          Let her have the <$3k savings.

          At least your home egg was safe, and she'll pass on the savings to you in chocolate cakes.

        • virhlpool on 14/01/2017 - 09:16

          @Kangal:

          Ahh.. I see you are looking at the combined savings. Sounds better.

    • TimApple on 11/01/2017 - 13:55
      +11

      Be wary of some term deposits, their rates are very uncompetitive even though they claim that they are.

      Savings in ING is even higher than term deposits in the big four banks. I'd rather put it there. Also remember that interests that are paid monthly compounds compared to ones paid annually.

      • sweepy on 11/01/2017 - 16:54

        Thanks yea monthly interest is preferred, then I can earn interest on my interest. I'm leaning towards ING Savings Maximiser @ 3%

        • Caped Baldy on 12/01/2017 - 09:56
          +3

          if you know someone with an ING account they can refer you so you both get a $75 bonus

        • Kkuba on 12/01/2017 - 12:29

          @phil1311:

          As of yesterday or day before, this has gone up to 100$ bonus. For both parties (as usual).

          Had an email on this come through.

        • fenric on 12/01/2017 - 17:37

          RAMS has a 3% account also. Compare to see which is best for you.
          RAMS needs a min $200 per month to get the bonus interest.
          I believe the ING one requires you to have another standard (Orange?) account with them to open the high interest account.

        • baz96 on 12/01/2017 - 23:42

          @Kkuba: I got that email too, but not everybody gets $100 as a bonus as some people are only offered $75.

    • mikeyrichster on 12/01/2017 - 10:20
      +1

      Avoiding shares because you don't have 5-7 years is broadly good advice but writes off many scenarios and investments that could still be appropriate (and optimal!). I personally would put the whole lot in shares.

      • [Deactivated] on 12/01/2017 - 11:36
        +2

        If you're planning on buying a house within 12-18 months, and you put $60k into shares, then you need to be comfortable with the possible downside - that the value of your investment may decline by a significant %.

        I'm generally pro shares. But if you're investment strategy is aimed at buying property (or more likely, if your heart is set on it), then your better off preserving the capital.

        But like you, I'd personally put the whole lot in shares. But it comes with the proviso that I wouldn't be aiming to buy a house at the same time.

      • Xastros on 12/01/2017 - 19:20
        +1

        Would have to disagree with you. You might think that you can predict that certain shares won't go down in value (and have a high yield) but this world is very unpredictable. Even master investors like Warren Buffet don't get it right all the time.

        If you want to buy a house in the next 12 months you really can't say with certainty that the shares or even share fund you buy won't go down in value. You can't predict that a sudden change in OPEC policy or some diplomatic event that affects markets.

        • mikeyrichster on 13/01/2017 - 10:29

          You can't say it with certainty over any period. The very investment that OP is saving for is vulnerable to the same volatility as a well diversified portfolio of highly-liquid shares, just ask someone who bought a house in Perth in the last 5 years.

          I'm just saying it's a blunt call to rule it out.

          I for one have not seen a single month that I couldn't liquidate my at least 80% of my portfolio for an annual rate of return less than a term deposit return or any of the other suggestions I've seen in here.

        • Xastros on 14/01/2017 - 01:16

          @mikeyrichster: This is true but a longer investment period allows time for your capital to recover. 80% of portfolio is probably not acceptable for OP if he wants to buy a house. E.g. the day he finds a house he might have had the full deposit required if saved in cash but if he was 20% down he might miss out.

          You might have been lucky with your investments so far. Take one of the most blue chip shares you could buy on the market. CBA Australia's biggest bank. If you bought in November 2007 at $61 and a year later in Nov 2008 wanted to buy your house your shares would be worth $40 (down 34%). If you had a longer investment timeframe you could wait it out and you would be fine but if you wanted to buy a house with that money, sorry you won't be able to. This is one of the 'safest' companies you can invest in.

          You personally might not have experienced a more than 20% drop in your portfolio so good for you. Doesn't mean it is a good idea to invest when you need the money in 12 months.

          I agree property is subject to devaluation as well. Sounds like the OP just wants a place to live though. Cash is not subject to capital variations so it is ideal for him given he is trying to preserve his capital while saving to buy a place to live.

  • activ8newbs on 10/01/2017 - 20:33
    +2

    What about EFT's? I've never invested in tehm, But I understand they're common amongst Ozb community. Are Vanguard EFT's good for 1-1.5 years?

    • brokenglish on 10/01/2017 - 20:36
      +2

      ETFs you mean…

      • activ8newbs on 10/01/2017 - 20:48

        LOL! Sorry, I work at a bank and I was just talking about EFTPOS Terminals. My mistake. Yes, I meant ETF's.

        • brokenglish on 10/01/2017 - 20:49
          +6

          Oh that's even better, maybe you can invest in better EFTPOS terminal technology!

        • sweepy on 10/01/2017 - 21:47

          @brokenglish: Lol. Yea thanks I did think about this but wasn't sure the loan term period would be long enough to warrant any sort of decent return. Would be keen to hear if any other opinions on this though.

        • poboy on 10/01/2017 - 22:00
          +6

          ETFs are basically shares (it's an index that tracks a given basket of shares). So you still have the volitility of the sharemarket. Stick it in a savings account.

          How would you feel if your $60k turned into $55k in the time period. You would feel more horrible than if you turned $60k into $65k. Not to mention the stress of checking your balance each week. That's a rollercoaster.

          Not to mention that the market is at a high at the moment. So likely to rebound as it settles.

        • sweepy on 11/01/2017 - 12:23

          @Dozingquinn: Loss aversion. Nice :) Yea good point.

    • Xastros on 14/01/2017 - 01:17

      ETFs are still subject to fluctuation in value. Not suitable for a 1-1.5 year timeframe.

  • supersabroso on 10/01/2017 - 22:06
    -7

    Mate….ignore all forms of investment. House prices are going up at a minimum of 10% per year. How much are you saving every year? 1-2% of the average house price? You need 5% to get a loan, get moving mate.

    Don't listen to all those naysayers, last time I heard them crying, house prices rose by 30% per year for 3 years in a row. That growth may have dropped down to 10% but it's still growth and you can't keep up with it.

    Investments are great, yeah, yeah. When you offset your $40k interest you have to pay for the first year by the $30k in rent every year (if you rented the place you bought), then remember that next year it'll be $37k in interest, then $35k, then $32k, then $28k…… Forget about the investments, the day will come when your interest is lower than your rent and then you're laughing your head off because house prices have doubled or tripled from when you bought.

    This is far cheaper if you buy a townhouse or an apartment. However, I think it's a poor investment as they come with far less land. The only thing that goes up in price is your land, your house goes in the opposite direction. Eg. $3M shack ready to fall over in Redfern, sold purely thanks to the 500sqm of land.

    • [Deactivated] on 10/01/2017 - 23:35
      +2

      Are you suggesting there is a housing market bubble?

    • djkelly69 on 11/01/2017 - 00:21
      +3

      Would you like to advise in what area house prices are going up 10%pa, or when/where house prices rose by 30%pa for 3 years in a row?

      Also buying a house is a type of investment…

      • supersabroso on 11/01/2017 - 00:33
        +1

        Yes, it is an investment in having a roof over your head. Sydney house prices sky rocketed along with apartments, will continue to grow due to the population demand and lack of land. I do now realise that OP seems to be from Victoria in which case there is some sense in waiting to get a larger deposit if he's going to make 20% instead of 5% due to the cheaper loan repayment % and avoiding mortgage insurance.

        • [Deactivated] on 12/01/2017 - 13:05
          +9

          Lack of land in the largest island nation in the world? Lack of infrastructure and planning more like it. We have PLENTY of land.

          I drove between Melbourne and Sydney over xmas. I saw lots of land and none of it was desert.

        • sd4f on 13/01/2017 - 09:34
          -1

          @w8: Also zoning restrictions and the corruption/cronyism that attracts.

      • lgacb08 on 11/01/2017 - 18:07

        Western suburbs of Melbourne, around sunshine. Price goes up around 20% for a year. My friend bought a house south western Sydney near ingleburn for $350k and sold it in less 2 years for $500 plus, all he did was spending a few K painting the weatherboard.

      • jellykingdom on 12/01/2017 - 08:50

        You sound dubious, though I don't understand why!!!

        I lived in Wollongong when it was suppressed market. Since 2014 it has gone up 20-30% pa every year, and they're still predicting even more growth because it's still way cheaper than Sydney

    • TimApple on 11/01/2017 - 10:34

      30% per year, wow please show me where this is.

      • prinsenhof on 13/01/2017 - 17:45

        The suburb i live in at wollongong rose by 51% over a period of 7 years. This is by comparing the price i bought my house for 7 years ago and the price two of my neighbours (same townhouses) sold them for in july last year.

        • TimApple on 13/01/2017 - 20:05
          +2

          51% over 7 years is about 6.5% growth per year if my math is correct. Many ETFs has this rate of return.

    • [Deactivated] on 12/01/2017 - 13:02
      +1

      Not more of this "past performance is a guarantee of future performance" bullcrap

      • StewBalls on 13/01/2017 - 08:05

        If you've got some better investment advice, we'd all love to hear it…not more of this trite "property bubble I'm a butthurt Gen Y" bullcrap

        I'm with supersabroso, the time to get into the property market is yesterday…

        • [Deactivated] on 13/01/2017 - 08:48

          I'm Gen X, and own property so keep your pre-prepared drivel up where it belongs.

          I also don't own one type of asset class like most village idiots in Australia do.

  • Peace Maker on 10/01/2017 - 22:14
    +45

    I'd go to Westpac and find this guy for some solid financial advice.

    • Froot Loops on 11/01/2017 - 02:56
      +15

      (profanity) me dead. Just read that post. I'm closing me westpac account in the morning

    • rambutann on 11/01/2017 - 09:30
      +8

      I completely forgot about this post, bought back the tears if I was with westpac i'd also be closing my account.

    • Caped Baldy on 11/01/2017 - 09:59
      +11

      I don't even have to click the link and I know which thread it is. Has anyone actually left westpac/St George because of it?

      • FatGPT on 12/01/2017 - 09:17
        +3

        Yes, I had over $200,000 in my Westpac account but as soon as I read that post I closed my account.

      • Tech and cars on 12/01/2017 - 10:22
        +1

        Surely it was a troll post though…

      • xavster on 12/01/2017 - 21:32

        Yes, already in the process of moving accounts & mortgage to another financial institution.

      • virhlpool on 13/01/2017 - 23:18

        Who knows the guy might be actually working in NAB or ANZ or CBA and just mentioned he worked in Westpac!

    • sweepy on 11/01/2017 - 12:25
      +2

      Lol yea.. I still think that guy was trolling though. Surely!

      • moar bargains on 11/01/2017 - 16:21
        +13

        Don't count on it… We live in a society full of rich looking poor people.

        • CodeXD on 11/01/2017 - 16:55
          +6

          You mean poor looking rich people?

        • kingmw on 12/01/2017 - 08:26
          +1

          @CodeXD: I guess it works both ways!

        • moar bargains on 12/01/2017 - 18:08
          +1

          @CodeXD: They exist too, but are less common. I was referring to Uni grads buying 80k cars, or people who walk in to Centrelink struggling to pay for rent and groceries but with recent model iPhones (and the associated plans etc).

        • secondstory on 13/01/2017 - 01:28
          +3

          @therog1:
          I've seen people living on the streets but somehow have the latest model iPhone and one of those expensive battery packs that you wouldn't find on ozbargain.

        • moar bargains on 13/01/2017 - 17:47

          @Myrtacaea: Staggering eh? I guess everyone has different priorities.

        • prinsenhof on 13/01/2017 - 17:49

          @therog1:

          Ever been to nepal? The Mt Everest trek the porters are wearing thongs and raggy clothes with touch screen mobiles hanging around their neck playing music.

          Phones are everyones priority it seems

        • moar bargains on 13/01/2017 - 18:04
          +1

          @prinsenhof: You're kidding?! And I thought it was just consumerism in the developed world…

        • prinsenhof on 13/01/2017 - 18:13
          +1

          @therog1:
          It was quite funny, i left my mobile in australia because it didnt even occur to me that they had mobile phone towers installed up there. I was the only one without a phone !!

        • virhlpool on 13/01/2017 - 23:24

          @therog1: Were you serious or kidding? The biggest consumer base (by volume and also value) for the most of global brands today is China and India, which aren't the 'developed world' by definition though their economy and job market are growing at much faster rate than the actual developed world.

    • eneloop on 12/01/2017 - 09:01
      +8

      I closed my West bank account and I don't even have one

      • Tech and cars on 12/01/2017 - 10:23

        LOL

      • dragonxx on 14/01/2017 - 21:24

        I think he was from competitors not westpac =))

    • secondstory on 13/01/2017 - 01:25
      +2

      To be completely honest, I think he just really really wanted the car and wanted to try find any means possible to justify it (though most was probably speculation form commenters I think). Reading back over it he was pretty passionate about it - and passion is greater than money and "common sense" for some people sometimes, even when the rest of society cant comprehend why.

      Just like how sometimes I would pay $5.50 for a coffee when I could make instant for a fraction of the price. Only, that was at a higher scale.

  • IMadeYouReadThis on 11/01/2017 - 08:09
    +5

    I was in a similar boat as you couple of years ago. At that time I parked my money in UBank as their saving interest rate was better than every other bank. Currently, ING appears to be good option for a short term gain. They are offering 3% on their saving account for less than $100k.

    Good luck

  • coolsteps on 11/01/2017 - 09:39

    ING appears to be good option for a short term gain 3%. or citibank structured investment in bank shares for mid to long term. up to 8% paid qaurtely

  • uder on 11/01/2017 - 09:56

    ING.

  • Skramit on 11/01/2017 - 10:10
    -1

    Shares!

    I mean, sure you can sit on the money in a interest saver account and earn next to nothing.

    Or buy some blue chip shares and earn dividends.

    • uder on 11/01/2017 - 10:12
      +4

      With respect this is bad advice. He is planning to purchase a house next year. It is much too short a time frame for a novice to be investing in shares let alone picking stocks.

      • Skramit on 11/01/2017 - 10:15
        -1

        Maybe. But I'm not advocating he open up a commsec account and start buying stocks at random. Only a complete muppet would try to "pick stocks" without advice from a professional adviser.

        OzBargain is a naturally 'tightarse' community and I think the idea of risk frightens most away from the share market, which I totally understand. But the share market offers fantastic value for a 12-24 month time frame, with the right advice for a small fee.

        But I know I'm not going to win this one…. :P

        • watwatwat on 11/01/2017 - 11:14
          +7

          "the share market offers fantastic value for a 12-24 month time frame" - tell that to the people investing in 2007-2008.

        • Skramit on 11/01/2017 - 11:30

          @watwatwat: Agreed, see my comment "I think the idea of risk frightens most away from the share market"

          /shrug

          I held my shares through the GFC in 08/09 and bought a house in 2012 using my shares as a deposit. Worked well.

          Everyone's experience will vary, depends on so many factors…

        • watwatwat on 11/01/2017 - 11:42
          +4

          @Skramit:

          That's great buddy. But 4-5 years is a higher number than 1-2, isn't it? 1-2 is a lot less than +7, isn't it?

          You give poor advice.

        • Skramit on 11/01/2017 - 11:56
          -2

          @watwatwat:

          It's fine. Your ignorance about the share market fluctuations and cycles doesn't make my advice necessarily "poor". Just laying all the options out there for OP who can make up his own mind.

          I still stand by the comment that 1-2 years is very doable with a properly constructed share portfolio and professional advice.

          Also remember the OP came to the forum asking what he can do with the 60k, knowing full well he could just sit on the savings. I merely present a relevant option.

          Enjoy your 2.4% interest. :)

        • watwatwat on 11/01/2017 - 12:35
          +3

          @Skramit:

          Vanguard documentation recommends at least 7 year investment.

          Link me to any legit source avoiding otherwise.

          Your "constructed share portfolio" ain't gonna hold up in a gfc, is it?

        • Skramit on 11/01/2017 - 12:39
          -2

          @watwatwat:

          Since you seem to have a crystal ball, you tell me. It held up just fine last time.

          Meanwhile as the US bull market continues upwards at record highs on the back of Trump, I'm reaping the rewards of a modest investment portfolio.

        • watwatwat on 11/01/2017 - 13:28
          +2

          @Skramit:

          Mate he needs the money in 1-2 years. It wouldn't have held up in gdc, no. After 2 years he was probably down 30%.

        • Skramit on 11/01/2017 - 13:45
          -1

          @watwatwat:

          You have clearly predicted a GFC for next year based on your replies :P So i don't blame your scepticism.

          Where as we non-doomsdayer's will continue to make a nice amount of money on the share market in 6, 12 or 18 months. Modest risk for decent reward.

          Each to their own.

        • watwatwat on 11/01/2017 - 14:02
          +1

          @Skramit:

          I never predicted anything. I am saying that if he wants the money in 1-2 years, then he shouldn't risk the sharemarket because the downturn could last more than 1-2 years.

          Essentially what you are trying to convince him of is gambling. You want to gamble that the gfc won't happen in the next 1-2 years. Maybe it will, maybe it won't. Smart investors wouldn't make the bet if they need the money for a house in 1-2 years.

        • Skramit on 11/01/2017 - 14:11
          +2

          @watwatwat:

          Essentially what you are trying to convince him of is gambling

          AH forget it.

        • watwatwat on 11/01/2017 - 14:32
          +2

          @Skramit:

          LOL I hope you never give investment advice to people. "Ohhh yeah, vanguard says minimum 7 years but just do 1 year mate, she'll be right".

        • Skramit on 11/01/2017 - 14:52
          +4

          @watwatwat:

          So Vanguard is now the bible of investment? The only way to make money? Sigh….

          I'll keep on earning money on the share market while you sit in your basement bunker with your doomsday survivor suit on, counting your bank interest that is less than inflation and then taxed.

          All you have to rebut investing in shares is "there might be a GFC soon" which is true but there might also be a plane crash soon, it doesn't stop people flying away on holidays. Don't live your life in fear, the same applies to low risk investments on the share market.

          We can go back and forth all day, but you're calling mine "poor advice" but from your comments you have a clear lack of understanding, so you're bagging my suggestion when you in fact have no idea how to make money with shares. Calling somebody else's advice poor because you simply don't understand it, is completely moronic and borderline trolling. Fool I am, for biting in the first place.

        • watwatwat on 11/01/2017 - 15:07

          @Skramit:

          I invest in the index. What do you invest in? If it's individual shares, you're gambling.

          "I'll keep on earning money on the share market while you sit in your basement bunker with your doomsday survivor suit on" - no matey. I've got my money in the sharemarket and earning money just like you. The difference is my timeframe for withdrawal is a lot longer.

          "but there might also be a plane crash soon, it doesn't stop people flying away on holidays" - there seems to be a major economic downturn pretty regularly in history. Let's say every 10 years, could be 20. Would you fly in a plane where the chance of death is 1 in 10 or 1 in 20? I certainly wouldn't.

        • Skramit on 11/01/2017 - 15:20

          @watwatwat:

          my timeframe

          Precisely. YOUR time-frame. It's not the only time-frame. It is Vanguards recommendation because the index funds are generally much lower risk and slower growing than ordinary shares, and pay lower returns. And there's nothing wrong with that. I'm pointing out it's not the only way to invest, there are other shorter term ways which you seem to have a problem with. There are day traders making money by the minute, hour, day and week. I'm talking 12-18 months for OP and you say this is "gambling" simply because it's a shorter time-frame than yourself?

          Also if the share market dives as you predict, your Vanguard index fund will dive with it.

        • watwatwat on 11/01/2017 - 15:22
          +1

          @Skramit:

          "there are other shorter term ways which you seem to have a problem with" - Ok man, what can someone invest in where they will get a guaranteed increase in cash in 1-2 years? What securities?

        • patinadiary on 13/01/2017 - 13:53

          @watwatwat:

          There are no guarantees in life, even ING can't guarantee that the interest rate will stay at 3% tomorrow.
          To answer OP's question. If the motive is Deposit preservation, sure stick it in the bank, but if the motive is Deposit appreciation, then surely there are other avenues (albeit slightly riskier) to invest it.

          To answer your question BHP has moved ~5% since the new year year (could have sold it by now and sat tight for a year with 5% instead of 3% dribbling in each month) , banks are up ~2.5% with dividends its over 5% this year,hell even without any any movement in price Telstra's Tax Adj Dividend Yield is currently 4.7%.
          Did you need more examples?

        • May4th on 13/01/2017 - 14:00

          @gaurav1504:

          and DSE and bellamy stocks.. oh wait

        • patinadiary on 13/01/2017 - 16:37

          @xbai: ok i'll bite, 1 year performance - Whitehaven Coal - 400%, Resolute Mining 430%. Feeling poor with the 3% now?

        • May4th on 13/01/2017 - 20:01
          +1

          @gaurav1504:
          or put it on red?

  • TimApple on 11/01/2017 - 10:39
    +1

    If you're doing term deposit, remember that the most you can get is around 2-3%.

    Look at the past growth of the property you're buying, is it 5% or more? Some property apps can show you this past growth for free. If so, you might be better off putting down the $60k as a deposit, because you can get a loan with less than 10% or 20% of property value, and you will be better served by just putting down the deposit no matter how small it is.

    • onetwothreefour on 11/01/2017 - 12:19
      +1

      But if he has less than 20% deposit then he may have to pay LMI which may mean it's better to wait.

      Do your own research OP and decide what's best for you.

      • sweepy on 11/01/2017 - 12:29

        Thats right - I am trying to save the 120k so I don't have to pay LMI. But very valid point about researching properly growth in the areas I'm looking at. This would be a useful practice regardless.

        • onetwothreefour on 11/01/2017 - 12:34

          How much are you looking to spend on a place and what would the LMI be for a 5-10% deposit?

          We bought our first place last year and put down a 20% deposit.

        • sweepy on 11/01/2017 - 12:41

          @onetwothree: I guess around 650k - 700k. Insurance would therefore be around 5-8k, which I would rather not pay.

          Congrats on the place, can I ask how much you paid, what sort of property (house, apartment, townhouse etc) and suburb?

        • TimApple on 11/01/2017 - 12:49
          +1

          Yes, even if you have to pay LMI, if the growth is spectacular in that area (like 10% or above), then there may be more money to be made by just purchasing the property right now and pay LMI.

          Having said that, if you are planning to buy in VIC, I think the growth rate is around 4-6% in Melbourne area, in NSW it's around 5-8% (please check these figures at RP Data or other legitimate data sources). Then it might just be worth putting it in a deposit account. I'd only pay LMI if the growth is definitely 8% or more.

          P.S. ING Savings maximiser is 3% right now if you deposit $1,000 every month. 3% of your $60,000 is $1,800 which is not too shabby :)

        • onetwothreefour on 11/01/2017 - 12:50
          +1

          @sweepy: we bought a place on the central coast in NSW. it's a bit far away from the city but it's all we could afford on my wages and 3 kids. It's a 3 bed house that can be converted easily into 4 beds, potentially 5 if we don't mind having some small rooms. We paid $410k so only had to borrow $328k which means my mortgage is $500 less per month than when I was renting, but there are extras to pay like council tax, water rates, home insurance etc.

        • sweepy on 11/01/2017 - 13:30

          @onetwothree: Nice, well done.

        • sweepy on 11/01/2017 - 13:32

          @Nobita: Great advise, thanks. Yes, planning to buy in Melbourne. Will look into the ING Savings Maximiser account, sounds decent.

        • goms on 12/01/2017 - 19:06
          +1

          @sweepy:

          You can actually capitalise the LMI. Your repayment will increase but not by much. Also LMI is not linear, it gets cheaper the more deposits you put in. With less than 10% deposit, the LMI can get quite expensive.

          I purchased my first investment property with LMI, while renting myself. I put down 10% deposit and had 11k LMI capitalised. Fast forward 2 years now ive had enough savings to reduce the repayment so the rental yield is less than the repayment and I have around 40k equity because of the growth.

          I was lucky to enter the market and had a bit of growth. If I chose to wait for another 10% now I wouldnt be able to get a similar property now and would be missing out on the equity. Im not saying that you should follow what I did but dont close the door to purchasing a house because of LMI. Do your homework and if you can afford the repayment after capitalising the LMI, it may be worth doing.

          LMI may be steep but if you see it from a big scheme of things, its ~2% of the purchase price which is not that much from a long term investment point of view. If the time you take to save another 10% is longer than the time the property takes to grow 2%, theoritically you will be losing out.

          Also you may need an extra 5% to account for expenses if not purchasing brand new. ~3% for stamp duty and the rest for solicitors etc..

          I wish you good luck with whatever you decide to do.

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