How People Afford Mortgage?

aliash on 08/08/2023 - 01:03

Bit of a background.

The combined income of around 150K after tax. My wife works part-time due to 3 young kids. We have a savings of 150,000 A$ with 0 debt. Want to buy a 3 bedroom house in a low socio-economic suburb of Sydney where the average median price of a home is 800,000 A$. Dont want to get into Units due to Strata overhead.

On average, I am getting quoted on the home loan for around 6.3%. If I take a loan for 600,000 $ that makes monthly repayments of $ 3,724 per month. House ownership includes maintenance, council rates,home insurance, bills etc which is extra

I am trying to do some maths and monitoring my expenses from the last few months. With Groceries, Utility Bills, rent i.e 475$ per week and all the expenses like car rego, swimming lessons for kids, childcare costs etc I end up with very little savings.

I am watching a lot of podcasts these days to understand the science of home ownership vs renting and one of the shows which I really liked is US based show called The Ramsey Show. According to his calculations, we should never buy a home that is more than 25% of our total income. Also, he never recommends getting a 30 years loan. Instead, he advises people to go for 15 year's loan.

Now in my scenario, I cannot even imagine getting a 15-year loan. Even for 30 years, it seems impossible to me. I cannot move out of Sydney due to work. Now as per my understanding, not a lot of people in Sydney have earnings of 150K a year after tax. If I am correct then how the heck people are paying such high repayments?

We are first-home buyers and therefore don't want to miss out on stamp duty. Also, I have a salary sacrificed around 20K which I can withdraw from my super under FHSS scheme so not inclined in investing in other states.

Should I just forget about buying a house and live all my life in a rented place? Sorry for sounding too naive but I need suggestions from a wider audience as I don't have many friends in Australia who can assist me with my queries.

Financial Home Loan

Comments

  • Unorthodox on 08/08/2023 - 01:13
    +44

    Far out, $150k post tax considering one of the income earners is working part-time and it's still looking that bleak?

    I would assume you remove the rent from your calculations and put that towards the mortgage repayments.

    How soon are the kid(s) going to move from childcare to 'free' kinder? That should free up some cash ongoing, and give you a buffer as interest rates decrease in the late 2024 or beyond. Do you have any parents/in-laws that can look after your kids for less?

    From convos with others, buying a first home honestly means scrambling for savings for the next 6 - 18 months (esp. if you are risk averse and want to build a buffer in the offset). I would calculate the savings you would get and determine how many months it would take to get to 3, 6, 12 months buffer in case interest rates rise a few more times and if something bad happens.

    • aliash on 08/08/2023 - 01:20
      +5

      Thanks for your reply. That is correct. I am adding the rent + extra for the mortgage payments. The little one is just few months old so another few years. 1 is in school and another one will start school next year. No family in Australia so no support whatsoever.

      If I wait for another 12 months then I am sure the median price for the suburb I am looking into will be close to 1 Million $. Sometimes I feel like if I take out the loan, I will be under huge financial stress and will be having regular fights with my Mrs. I am very much confused that is why posting on this forum.

      • Unorthodox on 08/08/2023 - 01:34
        +19

        Honestly, without going into the numbers, I would suggest booking in some time with an accountant or financial planner.

        Given you can't share all the details, it might be easier to have someone switched on to run the numbers for you.

        I honestly think you should be able to meet the repayments, the first year or so may be tough but you should expect some headway as rates decrease. You have a decent savings buffer for the deposit and you can take advantage or some schemes or you may even qualify for LMI waiver based on your profession.

      • rambao9 on 08/08/2023 - 12:08
        +12

        Tbh, i think you've done very good research and you're quite on the money with your calculations.

        You're right, if you don't buy now, the $800k areas will probably be closer to $1m in next 12-24 months.

        It may be tough the first 6-12 months after you purchase but another 12-24 months after that, you'll likely have gained equity in your property.

        It's an investment at the end of the day…

        • The General on 08/08/2023 - 19:52
          +18

          True, but unfortunately, having equity in your house does not reduce the mortgage repayments. At a guess, the OP would not want to sell the house in the short term with a young family, so the equity should not come into the equation.

          • rambao9 on 09/08/2023 - 16:53
            +2

            @The General: Agree with the first part, but for me, equity definitely did come into the equation when I chose to buy a property.

            Most the time, you're likely going to spend less renting a property (especially in the current climate), but you're essentially paying off someone else's mortgage and getting nothing to show for it.

            Meanwhile, although you will spend more paying off your own mortgage, you have the opportunity for capital growth.

            If you can afford it, it's almost always a no brainer to be investing into a property (unless you have better avenues for wealth generation).

          • sackrace on 10/08/2023 - 22:34
            +2

            @The General: Inflation reduces the burden of the mortgage though.

            However hard it is initially it normally gets easier with time as you get pay bumps and kids hit school age and don't require daycare. The mortgage stays the same.

      • samyall on 11/08/2023 - 13:36
        +1

        If I wait for another 12 months then I am sure the median price for the suburb I am looking into will be close to 1 Million $

        You hit the nail on the head here. People put a huge chunk of their salary into their home due to the constant appreciation we have seen in Sydney.

        Your US podcaster is right if you want a diversified portfolio of investment then you should not spend more than 25-30% on housing, however that is not possible in Sydney for most people. The choice comes down to home ownership and concentrated investment or renting a diversification.

      • serpserpserp on 12/08/2023 - 21:44

        for the suburb I am looking into will be close to 1 Million $.

        Look somewhere you can afford.

        I will be under huge financial stress and will be having regular fights with my Mrs.

        If you have limited control over your emotions. Don't put yourself in massive debt then.

    • morse on 08/08/2023 - 04:28
      +2

      The free kindergarten programs tend to be shorter hours so often not suitable for working parents compared to long daycare, that is subsidised (quite heavily for low income earners especially with multiple kids)

    • supersabroso on 08/08/2023 - 18:30
      +2

      Yep, it's pretty easy. We can afford a mortgage in Sydney because we don't have any investment properties. They are only for the rich or people that don't have families and can cope with living in cheap 2 bedroom apartments. If you want a mortgage, I'd recommend moving in and paying off at least 1/2 of it before you buy an investment property.

      You have more than enough income to buy an $800k house. Your home price to family income ratio is only 3.5 which is nothing, the median house in Sydney has a family income to house ratio of 13 times the median family income.

    • kaleidoscope on 09/08/2023 - 08:09

      How soon are the kid(s) going to move from childcare to 'free' kinder?

      This is somewhat tricky. Free kinder runs from 9.30-3.30 on the dot without meals. So might be harder for working parents to accommodate that. There are centres that run the program from 8-5 but just for the 2 outside hours and meals its full day cost for you which is absolutely insane. It is what it is sadly.

    • belongsinforums on 09/08/2023 - 21:24
      +1

      not 150k. 150k with 3 kids in sydney, opting for a 15 year loan

    • MessyG on 10/08/2023 - 18:46
      +1

      OP lives in Sydney. Property market there is beyond bleak.

  • Muzeeb on 08/08/2023 - 01:23

    How much rent are you currently paying per month?

    • aliash on 08/08/2023 - 01:29

      475$ per week i.e 2058.33$ per month

      • Muzeeb on 08/08/2023 - 01:34
        +1

        That's a big difference, plus $35k in stamp duty. Ouch.

        • aliash on 08/08/2023 - 01:35

          no stamp duty for us due to first home buyer.

          • coffeeinmyveins on 08/08/2023 - 07:04
            +10

            @aliash: That's only up to a certain amount. 99 Percent of Sydney prices are above that

            • bitesized on 08/08/2023 - 13:23
              +7

              @coffeeinmyveins: OP mentioned looking at properties around $800k. For NSW, properties up to $800k are $0 stamp duty. At $850k, the stamp duty is around $10k due to concessions.

          • Hairgainbunter on 11/08/2023 - 11:10

            @aliash: Might be a tactic at an auction to bid $800K first (obviously for something that is worth that much) as that might be a barrier for people to bid over that.

      • clipperroo on 08/08/2023 - 16:45

        have you heard of price-to-rent ratio? financially, you're better off renting than buying considering the numbers

        https://www.investopedia.com/terms/p/price-to-rent-ratio.asp

        • Thaal Sinestro on 09/08/2023 - 05:42
          +4

          Renting is, in the long run, a losing strategy. When you retire on limited outcome (pension + superannuation) you will still need to rent. The only way you can survive on a pension is by owning 100% of a property. There is always the option of a reverse mortgage too if you own a house and need more cash.

          • clipperroo on 09/08/2023 - 09:21
            +15

            @Thaal Sinestro: Renting ALONE is a losing strategy yes. But not if you invest the difference between repayments and rent. In OP's case, that's $1600 extra. Let's keep the math simple because there really are so many variables between renting and owning your own home. The stock market returns on average 10% annually. To keep it conservative, we assume 8% returns. If OP invests the $150k savings and invests $1600 per month over the next 30 years, that's a return of $4M or $6.5M at 10%. There are alternatives in building wealth apart from owning a property. Renting is not too bad if you get $4M at the end of the day.

            • jazinger23 on 09/08/2023 - 09:52
              +1

              @clipperroo: You forgot to mention the tax you would be paying for each year of gains .. assuming you could even maintain 8% year on year
              You are also forgetting the cost of inflation that eats away at the buying power of your income .. what will 4Mill even be able to buy you in 30 years time?

            • jazinger23 on 09/08/2023 - 15:38

              @clipperroo: You also haven't factored in rental increases…

              • clipperroo on 09/08/2023 - 16:42
                +3

                @jazinger23: I didn't factor a lot of things e.g maintenance, council, insurance etc. Anyway, my point was you don't have to stress yourself in owning a home if you think you'll struggle with the repayments. You can still build a decent portfolio even with renting.

            • Thaal Sinestro on 10/08/2023 - 05:21

              @clipperroo: Houses seem to increase by 10% in an average year, so they are on roughly on par with stock market gains. Owning houses is the safest and most reliable way to build wealth in Australia. Unfortunately. Houses should be for people to live in, not a get rich quick scheme. But we have to face reality and adapt to it, rather than pointlessly wishing things were different.

              • clipperroo on 10/08/2023 - 09:13

                @Thaal Sinestro: 10% yearly gains means a $1M home now will be worth $17M in 30 years. Do you think that's sustainable? Good luck to the next generation trying to get into the property market.

                • foxmulder on 10/08/2023 - 09:51
                  +1

                  @clipperroo: Barefoot covers this in his book, house won't go that high due to inflation.

            • meumax on 10/08/2023 - 13:53
              +3

              @clipperroo: It's hard to get a return on the difference in rent to repayments that'll beat the capital gain on a house due to the leverage. A bank will lend you 5 times your deposit. You'll find it hard to find a bank that'll lend you 5 times your deposit to buy shares or if they do give you leverage, the interest rate won't be as good as a home loan.

              I bought in 2020 with a $1M deposit on a $2M house. The house is now valued at $3M. That's a 100% return on the $1M I put up as equity. If I had taken my $1M and put it in the share market, I might be up 20-30% which is a pretty decent return but the return on the house is much better simply due to the fact the bank allowed me to have $2M to invest instead of just $1M.

              • clipperroo on 10/08/2023 - 14:41
                +2

                @meumax: Congrats on the massive gain! But this is cherry picking, you're comparing one house against the entire market. If you want cherry picking, compare it with Afterpay shares that went from $8 in 2020 to $150 in 2021.

                • meumax on 10/08/2023 - 16:03
                  +2

                  @clipperroo: Sure. But the point I am trying to make is that an unleveraged investment has to do A LOT better than the leveraged investment to beat the leveraged investments performance.

                  With PPOR specifically there are other tangible and intangible benefits. First and foremost, the gain in PPOR is untaxed. Second, PPOR has an very useful utility. i.e. it can house you and thus protect you from the whims of a landlord. Shares cannot. Third, it seems like the whole of Australian society from government institutions/big business/media actively work to prop up house prices lessening the risk.

                  • clipperroo on 10/08/2023 - 16:20

                    @meumax: Not sure where you're going. I'm not against buying a home, I just suggested there's an alternative way if OP thinks he can't afford the repayments.

            • Name on 11/08/2023 - 07:14

              @clipperroo: I find the argument of invest the difference between repayment and rent and you end up better off hard to grasp. As my mortgage repayments are less than the cost of renting now (and they were comparable when I bought) that I've owned a property for 10 years and rent has sky-rocketed unlike my mortgage repayments.

              /edit - also I feel like 90% of people that argue this rule don't actually invest that difference and end up spending that difference on lifestyle.

              • clipperroo on 11/08/2023 - 11:16

                @Name: That's because 10 years ago, most probably the ratio favoured owning a home. But that's not the case now since the property prices have skyrocketed while rent is just keeping pace with inflation.

                And yes that's true, you need discipline to keep investing every month.

          • trapper on 09/08/2023 - 09:23
            +2

            @Thaal Sinestro: You can though just buy an investment property in a cheaper area with the long term plan to retire in it.

            Then just rent where you want to live now for much less than the cost of owning the place. With more flexibility too.

        • star-ggg on 09/08/2023 - 08:16
          +6

          Financials is only one factor. Renting in Australia sucks. You can never make it your home cause you can be kicked out in one month once your lease is up. Finding a new place is so stressful and time consuming that you're always compromising between something that's good enough and being homeless.

          Plus you can guarantee rents over the long term will outpace wage growth, so either you earn so much you can build a buffer or be prepared to never be able to safely retire.

          • Worf on 09/08/2023 - 20:27

            @star-ggg: So true… Finding a rental and moving is a pain at the best of times, I imagine it would be even more challenging with three young children (due to being time poor and all the extra stuff toys/equipment/etc that comes with kids).

            And yes, inflation will deal with the debt.

            @aliash / OP: A lot of home loans will allow you to pay off sooner, so a 30 year loan might could work out to be 15years especially when kids get a bit older and wife picks up an extra day or you get a pay rise or promotion.

            Having said that, no one can predict the future and a number of things can go wrong with home ownership.

          • May4th on 10/08/2023 - 10:02

            @star-ggg: You have to account for leverage. You put in 10-20% deposit and then you only cover the difference between interest and rent, looking at it pirely from investment perspective, and then there's negative gearing and capital gain exemption with tax incentives

            It's basically a margin loan to leverage 10x the capital without the significant downside risk (generally speaking in capital cities)

            That and the fact even if house price won't keep up with inflation, rent will, and everyone needs a place to live so rent is something you will keep paying also

            • star-ggg on 10/08/2023 - 10:21

              @May4th: Yes, and also a mortgage is also the lowest interest you can get to borrow money.

  • bigroo on 08/08/2023 - 01:28

    doesnt the goverment have some scheme you can use to buy with 5% and they share 30% but you have to repay if you sell etc

    • aliash on 08/08/2023 - 01:29
      +2

      we still need to pay 30% back to the government and the scheme is only for key workers. Me and my wife are not key workers.

      • bigroo on 08/08/2023 - 01:33

        oh i didnt know that i thought it was for anyone especially thoses struggling to get a mortgage, you only pay it back if you sell the house was my understanding, basically they own 30% share in your house.

        • filmer on 08/08/2023 - 13:32

          You can buy out the equity. Upon sale they get their equity returned.

        • star-ggg on 09/08/2023 - 08:19
          +2

          If the government did this prices will jump 20% then 10%p.a after. Basically pumping taxpayer money into housing assets.

    • hasher22 on 09/08/2023 - 01:00
      +1

      They wouldn't be eligible anyways, cause the combined income needs to be 120k before tax, OP is combined 150k after tax

      • thanatos350 on 09/08/2023 - 10:35

        What happens if someone using this program ends up making more income?

        • AustriaBargain on 09/08/2023 - 13:36
          +1

          The government houses asylum seekers in your home.

        • hasher22 on 09/08/2023 - 14:10
          +1

          They have yearly audits. If you earn more, and they reduce the percentage you're on.

  • trustnoone on 08/08/2023 - 01:32
    +20

    I'm not sure how useful the US info will be for you, but you also have to take into account the circumstances at the time. For example Sydney is one of the least affordable places to buy housing IN THE WORLD, second to Hong Kong in some lists. Not to mention you have kids (dependents) and not born into riches ($500K from parents) or at the very least take advantage of what you have (like living with family while you rent out your mortgaged house paying it off faster plus free gift of a few hundred k from parents.).

    I hate to be negative, but most also have a higher combined income too, usually each on $100K in Sydney. And even then with the high interest rates right now, and low available stock, you'd typically be looking out way West/Very far North (as in further then Gosford)/South. But many of these places have been tapped out due to people now being able to work from home and thus moving out there. Or places like St Marys getting the new train line and developers holding land in anticipation to it.

    Put plainly, the 25% income stuff with 15 year loans just won't work here. Because Sydney isn't based on "buying a home" its based on "buying an investment" people are happy with a 30 year loan on a $1mil house because in 5 years it will becomes a 1.5Mil home and they've made $500K sitting on the place.

    And so people usually buy whatever they can afford, so they can start building equity, have that money go to mortgage instead of rent and grow on the market ladder.

    • aliash on 08/08/2023 - 01:38
      +1

      the suburb we are looking into has a median price of 800K for 3 bedroom house. My question is how the heck someone can do the repayments with kids and less than 200k post-tax income? Family easily forking out 1 Million for the homes in Sydney and I am struggling to do the calculation on a 600K loan.

      • Some Human on 08/08/2023 - 08:26
        +57

        If you think a 600k mortgage is unachievable on a 150k take home wage, might be time to look at your spending.

        • borrisz0r on 09/08/2023 - 08:13
          +3

          This. 150 take home is far above the average.

          Not sure if this is a humble brag, or if the OP is unaware of his spending habits vs everyone else.

        • star-ggg on 09/08/2023 - 08:26
          +4

          Or OP is way too conservative in their estimates. For example, having "savings" left over each month. The home repayment is the saving because it is investing in an asset (unlike rent which is simply an expense).

          Also, if the house appreciates, you can ask the bank to increase the loan size if you need emergency funds. Of course the loan will take longer to pay off but it also means you don't automatically need to sell your house for emergency cash.

        • brandt on 09/08/2023 - 15:31
          -1

          Spending is immaterial. OP need at least 650k to afford a 800k house with his savings. On a 150k combined income with 3 kids, banks wont give him more than 550k. Its time to look at whether OP should live in Sydney or look to move to Brisbane or Perth outer suburbs.

          Edit - sorry just realised its 150k post tax. I don't understand OP's math.

          Take Home Salary per month - 12,500
          Spending - 475 per week - is 1900 per month (heavily underestimated in my opinion)
          Mortgage repayment - 3800 per month

          Left over money = 6800 per month.

          How is this financially stressed? Even if you double house hold expenses - thats still leftover 4800 a month or 57,600 a month.

          • BartholemewH on 10/08/2023 - 08:05
            +1

            @brandt: 475 was rent per week, not household spend.

          • Meconium on 11/08/2023 - 01:10

            @brandt:

            I don't understand OP's math.

            I don't understand your maths OR your English

      • freefall101 on 08/08/2023 - 13:06
        +2

        Rich parents and/or changing house. Or not having kids.

        Not all that many sales go to first home buyers and the cost of upgrading a house is pretty minimal compared to buying the first time. It's why getting into the market is important, once you're in your house then becomes relative to everything else. Moving to a nicer house means picking up the difference between those two properties (plus stamp duty).

        I'm doing a $450k loan in Melbourne on about $100k take home for 2 people. It's not particularly hard, we're paying off significantly more a month than the required repayments. We did a deep dive on all our spending, reduced takeaway and restaurant spend, I stopped buying as much pointless crap, looked at how to reduce our heating/cooling, only have one car for the 2 of us, etc. We also dump every bit of extra cash in the offset, tax returns, bonuses, sold a few things, etc. Did those moomoo share things, sold the shares, straight into the offset. Leftover cash after paying for bills and such goes into the offset.

      • meumax on 08/08/2023 - 16:17
        +5

        Because you're being too tightass.

        On your figures you'll have around $9k free cash flow per month to spend and save. That's more than enough for a very nice lifestyle even with 3 kids.

        Just do it. You said it yourself, if you don't act now, the price is gonna be $1M soon and you'll find it even harder psychologically to buy knowing you could've had it for $800k if you'd just acted sooner. You can comfortably afford it. Don't regret this decision. House is the most important thing in Australian life.

      • cadwalader on 10/08/2023 - 15:07

        What made you judge that said suburb with 800,000 A$ houses was a low socio-economic suburb? If you feel 800k is too much, then go somewhere cheaper.

  • avoidfullprice on 08/08/2023 - 02:32
    +24

    … Want to buy a 3 bedroom house in a low socio-economic suburb of Sydney where the average median price of a home is 800,000 A$. Dont want to get into Units due to Strata overhead.

    … Also, he never recommends getting a 30 years loan. Instead, he advises people to go for 15 year's loan.

    …I cannot move out of Sydney due to work. …

    …We are first-home buyers and therefore don't want to miss out on stamp duty.

    Should I just forget about buying a house and live all my life in a rented place? ..

    Mate, separate your want from need, and be realistic with both. You don’t have capital but want to buy a 800k house first home with less than 30 year term loan but must be in Sydney . That’s unrealistic.

    You need to understand that you can pay off your loan earlier. Longer term loan results in lower minimum repayments, but you can pay more if your start to earn more and have higher saving rates. Also once you get your foot into the market, your capital grows with you. If you take a smaller mortgage in the beginning, you pay less in interest and build up your capital more to upgrade.

    Also in US loan rates are fixed, in Aus loan rate are at most fixed for 5 years but at a premium. US advices are most certainly need to be accepted with relevance.

    In short, the mentality of either get a house in sydney first time or rent forever is narrow minded

    • jjjaar on 08/08/2023 - 07:46
      +2

      Mate, separate your want from need, and be realistic with both

      Spot on. OP, you may need to reconsider this

      Dont want to get into Units due to Strata overhead.

      If a strata property costs $600k, then your loan is reduced and your repayments are reduced. Even the strata overhead won’t come close to the difference in loan repayments.

      • Yoo05 on 11/08/2023 - 22:47

        True, people worry about strata fees and miss out, just get your foot in the door, slowly you move up.

    • TEER3X on 08/08/2023 - 20:02

      Also generally no break costs in the US

  • screensaver on 08/08/2023 - 04:00
    +2

    Of course you can do it. Take a 30 year loan if need be. If you can look for one with value added extras like solar panels, sleepout, land size etc.

  • USER DC on 08/08/2023 - 04:11
    +1

    All I know is whenever I go to inspections, auctions etc. (if I or someone I know ever do), We are always told by agents are you willing to increase by $80K-150K ? from their advertised price (already cheapest listings). + not to forget the lineup we have to go to now like if its covid supermarket shopping time (for inspections).
    People have too much money is the problem, especially some of the top notch ones who got like 10 or more properties in their portfolio already, who are just throwing away their money like it's just ocean water to the sale agents.

  • morse on 08/08/2023 - 05:16
    +63

    What am I not getting? From what you’ve described you can afford it.

    $150k after tax = $12,500/month
    $12,500/month - $3724 = $8766 for other expenses

    But you can certainly afford more than than if you take home is $150k after tax

    If you got at $650k loan (based on $150k savings and $800k house)
    Monthly repayments (principal and interest) on a 15year loan would be $5,570/month = $6,930 left per month for everything else.

    Then the trick to paying it off faster and minimising interest paid is to have an offset mortgage. This is where you pay the minimum repayments and then have everything else sitting in an offset account. So whatever doesn’t go on bills etc means you’re paying less interest. https://www.canstar.com.au/home-loans/mortgage-offset-accoun…

    In terms of the mortgage be very careful in terms of what you sign up for. I personally avoid mortgage brokers, remember they get commission for a reason. I met with a couple to get a feel for options and then negotiated directly with the banks myself until I got the best terms and interest rates. Look out for fees if you were to discharge the mortgage early or refinance, honeymoon rates etc. I can’t believe how many people sign up to the first mortgage they find.

    Remember if your purchase is your place of residence you’re also not paying rent (unless of course you’re living with family rent free as it is), so at least that one expense taken care of.

    Other savings:
    Avoid subscriptions (Netflix etc) - we just cycle free subscriptions or just do one month then cancel if there’s something we really want to watch. Same for apps, very few apps are worth paying for if you’re on a budget.
    Get kids clothes on clearance the size ahead for next year at end of season, or do op shops or hand me downs. One or two nice things, but for everyday wear they should be getting dirty and torn if they are having fun anyway.
    Avoiding eating out or takeaway unless it’s super cheap and only occasional
    Use the catalogue half price specials for core groceries (not the things you wouldn’t otherwise buy)
    Make sure you’re getting the best deal in any insurance, electricity etc available.
    If you have close friends or family who buy gifts for the kids, consider asking for vouchers for swimming lessons or similar as the gift.
    Sell things you no longer need on marketplace if they are worth say $20 or more.
    Prepaid mobile instead of plans on devices bought outright at whatever you budget is
    Monitor petrol prices and buy when low

    The other thing to consider buying in the west of Sydney is not to buy into one of these new suburbs with no trees and dark roofs - you’ll spend a fortune on air-conditioning. Go for an established suburb with trees even if the houses aren’t brand new. .

    • boomramada on 08/08/2023 - 09:23
      +10

      This is pretty much how I did it and plus a few other things now I'm mortgage free.

    • impoze on 08/08/2023 - 09:41
      +4

      Best response,

      This is ozbargain, learn saving hacks from others and cut down expenses

      Takes effort but its worth it in the long run

      Pour every cent you can into offset

    • ar7ist on 08/08/2023 - 14:39
      -3

      $150k after tax, wouldnt that be $8111.26?

      • onetwothreefour on 08/08/2023 - 15:56

        150000 / 12 = 12500

      • stjep on 08/08/2023 - 16:36

        $150,000.00/12 == $12,500.00

        $150k is net, not gross.

    • Mysterious Laptop on 09/08/2023 - 00:33
      -1

      Solid comment. I think it's more of a troll tbh.

    • Thirtyfourfifty on 09/08/2023 - 20:07
      +2

      I think OP might just be anxious leading up to what is a major life decision. Totally get it though. It defs helps to do the objective math like this person has done so you can decide on a place with a level head, knowing that financially you'll be fine!

  • pollopollo on 08/08/2023 - 06:13
    +14

    With Groceries, Utility Bills, rent i.e 475$ per week and all the expenses like car rego, swimming lessons for kids, childcare costs etc I end up with very little savings.

    So, your weekly after tax income is $2885. You spend $475 on rent, leaving $2410 for other expenses. Not to be rude, but that is a lot of money for living expenses. You really shouldn't have any trouble making it work. Might be time to do a budget.

    Even replacing rent for the loan repayments you've quoted, taking your housing costs from $475 per week to $866 per week, leaves you with $2019 per week. Can you seriously not get by on that?

    While I acknowledge everyone's situation is different, my family of three gets by quite well on living expenses (after mortgage repayments) of $850 per week. So, it is possible.

  • Ash-Say on 08/08/2023 - 06:53
    +8

    You have leftover funds of $8766 even after paying mortage repayment of $3724 per month.

    What are you buying or what kind of expenses you have if you can't afford with such an excellent income?

    I know few families in Western Sydney whose net household income is $8500 per month and they still need to pay $3000 mortgage repayment. They live a pretty normal life and still have some savings left.

  • mskeggs on 08/08/2023 - 07:29
    +3

    If you can’t make any cuts to your lifestyle to pay for a mortgage you will need to buy a cheaper property if you wish to own rather than rent.
    I agree house prices are high, but you have a high income and can reasonably afford to buy if that is your priority.

  • capslock on 08/08/2023 - 07:29
    +3

    Dont want to get into Units due to Strata overhead.

    Lots of people here will probably disagree with me but think of strata fees as overpriced building insurance.

    If this is what is preventing you buying your own home then I don't know what else to say.

    • jjjaar on 08/08/2023 - 07:51

      It’s a good point, it shouldn’t stop you from wanting to buy.

      And it’s not always overpriced. Buyers just need to actually check what the strata fees are going to.

      I’ve seen some properties that are in inactive owners corporations, therefore you need to purchase your own building insurance. For the majority of them, these insurances are similar, and some are even higher than the yearly strata repayments on comparable properties that are still within active owners corporations.

      Couple that with maintenance for common property including gardens and nature strips, and for some people this can be a benefit and a cost savings to not have to do those things yourself.

      As I said, always check what the strata fees are going to, but it can be beneficial.

    • May4th on 10/08/2023 - 09:36
      +1

      It's not just overpriced, but out of your control. You may be paying for common area repairs that you have no use of, at significantly inflated prices. There's well run stratas and then there's a lot more of really terrible ones

      • lancesta on 12/08/2023 - 09:10

        Yeah this is it completely. If it's got a pool and gym it's probably crazy expensive. Whereas I've seen ones that do the bare minimum, just insurance and mowing the lawn (only outdoor common areas) so they're cheap to run.

  • mr fox on 08/08/2023 - 08:02
    +5

    A max 15 year loan and 25% of total income. Does this person sell time machine's?
    Completely out of touch with reality for Sydney/Melb, and probs our other large cities.

    • stjep on 08/08/2023 - 16:37
      +3

      Also out of touch with a lot of the USA, but I'm sure you can make it work in a decaying fentanyl town.

  • Danstar on 08/08/2023 - 08:24
    +4

    Also, he never recommends getting a 30 years loan. Instead, he advises people to go for 15 year's loan.

    Get a 30 year loan and just make extra repayments which will reduce the length of the loan…

    Most banks don't charge any fees for paying out a loan earlier…

    • pinkhandbag on 08/08/2023 - 20:41
      +2

      What about an offset account rather than paying off the loan to have some easier to access cash if ever needed

      • bokka on 08/08/2023 - 21:52
        +2

        Offset isn't strictly necessary as most loans allow redraw if you are ahead of payments. For a PPOR there is no tax advantage for an offset vs redraw.

        • 911r on 09/08/2023 - 14:42
          +2

          Rather keep it in offset as it's your money, redraw can be absorbed by the bank at any time. Also if you ever switched it to an investment and had a redraw balance you can't take it out for personal use without impacting the tax structure.

          • MondaySleeper on 10/08/2023 - 06:52

            @911r: This the proper way of doing. This makes extra payments to the principal amount, and tax free which otherwise would attract your rate %

        • BartholemewH on 10/08/2023 - 10:09

          It's important if you want to convert PPOR to investment.

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