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

  • zeoko on 09/08/2023 - 08:20
    -3

    Maybe someone else suggested it, but have you considered rentvesting? Look at doing PKs course so you can learn how to invest in properties interstate and build wealth.

  • marchie on 09/08/2023 - 08:21

    I don’t think this has been mention specifically, but in the US you can get 15 and 30 year fixed rate loans. Most we can get in Aus in 5 years.

    The Ramsey principals provide guidelines to not overextend yourself. 25% on housing leaves enough money for living. You can’t ignore math and say it doesn’t apply to you. Once you work out the number you can afford, you need to compromise on something to make the numbers work. Eg. smaller townhouse, living further out.

  • opt on 09/08/2023 - 08:56
    +4

    Let me start by prefacing that I am not from Sydney, so some of my assumptions could be a little off. Nevertheless, I am going by publicly available data on median house prices (excluding units) and historical growth trends.

    As some have already said, I too think you can afford it. However, given you're looking at buying a house in low socio-economic suburb (as you put it), I think the more important question is whether you should buy.

    Its one thing to buy in a good or even an average suburb with appreciating prices and a strong historical growth. But you have to be extremely careful when buying in a suberb with falling prices and not so good historical growth. If you look at current and historical data of a typical $800k Sydney outer suburb, you may see only about a 5% growth in the last 10 years, less than 3% over the last 5 years and a drop of 3~5% over the last 12 months. From an investment perspective, you are probably better off renting and investing your savings elsewhere than buying a house in such area.

    Then you have to also consider non-monitory aspects such as How good is that neighbourhood for living and raising a family. What are the standards of local schools and daycare facilities? How is the commute to work? What about local services and facilities ?

    Buying a house is a long-term commitment, especially in an area with stagnated or falling prices, because you can’t just pack up and leave if you don’t like the area. Therefore you should have a long hard look at the big picture. Just my 2c.

  • Farrba on 09/08/2023 - 09:00

    i wonder if OP is wishing to buy a nice house in a really good suburb, but given the current high interest rates and average price of houses in Sydney, he might be sort of wondering how other people able to buy nice houses in suburbs near the city.

  • Herbse on 09/08/2023 - 09:18

    You're best bet is finding a smaller place. 180sqm townhouse for under $600k somewhere further out than where you're looking. That's the new starting point these days.

  • Duckie2hh on 09/08/2023 - 09:49
    +1

    OP is very quiet after being criticized about his/her spending…

    • aliash on 10/08/2023 - 00:27
      +1

      I am taking notes :D

      • Duckie2hh on 10/08/2023 - 09:37

        I am in a similar situation to you (income wise) and managed to handle a $1M + loan. Each to their own, but it is possible.

  • ThadtheChad on 09/08/2023 - 09:53

    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.

    Word of caution, information/knowledge based on US based shows would likely not carry over to our market.

    • US does fixed loans for the entire duration of the mortgage - as a consequence rate hikes etc do not impact mortgage holders (this also means the Fed can really give the interest rate lever a hard pull without (profanity) over the vast majority of the mortgage holders).
    • In the US you have a wide spread of viable cities and towns with inexpensive options to very expensive options. For VHCOL cities, you're likely making big money there - the scales are unheard of here (with some exceptions here and there - I dont know anyone salaries bringing in 600-900k/year here among my peers). As a direct consequence you can adhere to the "25% of total income" rule of thumb easier.
    • Further to the point above, you are forced to follow the "25%" rule largely due to the incredibly poor regulatory environment surrounding employee rights (i.e. needing to have a f-up fund) as well as for higher education and healthcare funds.
    • JimB on 09/08/2023 - 11:17

      I've always wondered how 30 year fixed loans works in the US.

      Do you pay a penalty if you sell the property and pay out the loan (and interest rates have fallen)? do you pay a break fee like here?

      • ThadtheChad on 09/08/2023 - 11:51

        I believe so. I've heard of ones where you're allowed to make extra repayments without penalties, so it largely depends on the mortgage provider; for the most part though, the common ones have early/extra repayment fees. The specific value of the penalty/fees would hinge on the amortisation schedule, years of loan etc.

        • JimB on 09/08/2023 - 12:11

          I suppose similar to here.

          Imagine they had 30 year fixed loans here.

          "The lowest recorded rate for a 30-year fixed-rate mortgage was 2.65% in January 2021,"

          Could you imagine how much more house prices would have increased. It would be nearly risk free buying a property in the capital cities.

          • ThadtheChad on 09/08/2023 - 14:13
            +1

            @JimB: Potentially - its a lot more complex than that in my opinion. This is a symptom of a range of societal issues that are manifesting in the absolutely cooked property market.

            For instance, (now this is a very sweeping generalisation) for the vast majority of the populace, investing into real estate is THE wealth builder. The frameworks around "negative gearing", exempting PPOR from CGT on sale (with laughable enforcement), concentration of the populace around a few urban cities, have all lead to the perfect storm of skyrocketing real estate prices.

            To summarise, we have a ton of dumb money that is being poured into propping up our real estate industry in the form of selling each other homes for an ever-increasing amount of money. Instead of actually investing in innovation and enterprenurial pursuits.

            (I'm a house owner myself)

            • JimB on 09/08/2023 - 15:25
              +1

              @ThadtheChad: I don't disagree that we have a ton of dumb money that is being poured into propping up our real estate industry in the form of selling each other homes for an ever-increasing amount of money. Instead of actually investing in innovation and enterprenurial pursuits.

              However, if I could borrow for 30 years at 3% and the property was cashflow neutral or positive, you'll be crazy not to borrow as much as you can and buy as many as you can.

              I'm not saying it's good for society, but it's good for your retirement.

              • ThadtheChad on 09/08/2023 - 15:44
                +1

                @JimB: Abso-bloody-lutely! No disagreements there. I'm no saint… I'll not intentionally disadvantage my family's financial position by not taking advantage of opportunities as they present themselves.

                • JimB on 09/08/2023 - 16:38
                  +1

                  @ThadtheChad: And if you didn't take up the opportunity, believe me Mr '100 investment properties and counting' will.

                  I'm not sure what the solution to it is, while I'd like for my property portfolio to grow, I don't want my kids to not be able to afford a property in future.

                  At least from my viewpoint, I try to treat my tenants fairly and not bump up the rent because I can. I must admit I have recently on one property ($30 p.w. but still below market rent) over a 3 year period because my expenses (interest and other costs) had gone up about 5 times the rental increase over the same period.

  • knasty on 09/08/2023 - 10:45
    +1

    There's a lot of good advice here. Another thing to consider is if There's room to build a granny flat in the backyard wherever you buy. Whilst its an additional capital outlay the rental returns on granny flats vs the cost to build are very impressive and can contribute overall towards paying your loan down.

  • pegasusx on 09/08/2023 - 11:48
    +1

    Raising a family in Sydney Australia is costly but also a lifestyle choice and an active sacrifice. We have 2 young kids and a single income. The biggest cost for us would be education and entertainment / organic boutique farm-sourced food items.

    These are the largest two categories in terms of cost for us - (Annually. Not including utilities and other expenses.)

    Socials / Education

    C1 School Fees - Q x 4 $16,252.00
    C1 (Afterschool Activities) $6,160.00
    C2 Day Care fees - 5 Days $13,480.00

    E Eating Out (3 Days) $15,900.00
    G Groceries $34,300.00

    • AFOS on 09/08/2023 - 12:17

      Nothing on holidays?

      • pegasusx on 09/08/2023 - 12:54

        Noting in the $5k+ bracket. Just short stayovers but it's been rare in the last 2 years.

    • coolhead on 09/08/2023 - 12:22

      Groceries - $34,300 per annum equals / 52 = ~$660 pw.. is that correct?

      • AFOS on 09/08/2023 - 12:33

        Seems about right if you have 2 kids and spend on organic food mostly.

      • pegasusx on 09/08/2023 - 12:56

        Fluctuates week to week. e.g. sometimes Meat orders are sometimes $40x+
        But averages out to that amount.

        • coolhead on 09/08/2023 - 15:45

          ok thanks, family with 2 kids here and i was worried my monthly $900 is a bit high as it has gone up - mainly vegie groceries and we buy whatever we want..

          • pegasusx on 09/08/2023 - 16:22

            @coolhead: Veggies are ok. "Organic" Meat is the killer in terms of cost and availability.
            Wife found these small farms that sell directly to restaurants and somehow managed to have them sell to us

    • Baghern on 12/08/2023 - 17:51

      wow, that grocery and eating out budget is crazy

      now that's a lifestyle choice… around food

      *not criticising

  • Odin on 09/08/2023 - 12:15
    +4

    You have 150k after tax.

    You can easily borrow $1M

    No idea what your worries are.

    • aliash on 10/08/2023 - 00:30

      The issue is not borrowing. The issue is paying off the mortgage.

      • Odin on 10/08/2023 - 00:53

        you should have no problem paying it

      • meumax on 10/08/2023 - 13:28

        You won't have a problem. If you keep up the repayments it is guaranteed to amortise itself after exactly 30 years. But I know you will do it faster because on your income you'll be able to pump in much more than the scheduled repayment and your income will continue to go up over time.

    • Thaal Sinestro on 11/08/2023 - 07:11

      Yes, $150,000 post tax is almost an average OzBargainer income ($250,000 pre-tax). No need for you to "buy a 3 bedroom house in a low socio-economic suburb of Sydney" and live with the hoi-polloi. Relocate to Vaucluse or Avalon Beach.

  • furyou on 09/08/2023 - 12:37

    US based show - we should never buy a home that is more than 25% of our total income

    US house prices aren't like here. Ignore him

    You'll never buy a house in Sydney with those ideals.

    Also, 30 years vs 15yrs means nothing. You put extra in an offset acct, you pay as fast as you can.

    • furyou on 09/08/2023 - 12:45
      +2

      Here's what you do
      You borrow $1M buy a house
      30yrs, offset acct, as little forced payments as you can - cuz 2 kids and % rate hikes in future.

      Say you pay 4k loan repayments = 48k/yr
      In a year, your house is worth 1.05m, you're ahead 2k.
      More likely it will grow more than 5%.

      And that's why ownership > rental.

    • cauilfield on 11/08/2023 - 10:05
      -1

      what do you mean by US house prices?

      Housing in the US is usually more expensive than here

  • AFOS on 09/08/2023 - 12:46
    -3

    Whilst most are fascinated by $150K after tax, nobody seems to be taking into account holidays expense at all.

    Not sure about OP's kids age, but it always amuses me what parents do with their children during school holidays. There are not too many kids in school-run holiday programs and they are mostly of very young age. It is just too hard to make friends there.

    There are no cheap flights during those periods. Driving huge distances with a family in tow is not a choice for everyone.

    So, if you want to spend some quality time with your children (as they will grow up so soon), you need to fork out some cash. Just a flight to, say, Singapore for 5 people in high season will set you back $5K - $7K. And this is before hotels, entertainment etc.

    Frankly, I get OP's gripe.

    • smartazz104 on 09/08/2023 - 13:53
      +3

      If OP can't figure out how to afford a mortgage, international holidays are off the cards. Or you can go on your yearly flights and rent forever.

    • star-ggg on 09/08/2023 - 17:21
      +2

      Depends on what you think are better for the kids. A stable home environment or high season holidays.

    • meumax on 10/08/2023 - 13:30
      +2

      You don't need to go overseas to spend quality time with your kids.

    • Diji on 12/08/2023 - 18:42

      LOL

  • digitalbath on 09/08/2023 - 12:50
    +4

    If you can’t afford a mortgage on your combined salary, then you need to make some changes.

  • Bunnyburger on 09/08/2023 - 12:56
    +3

    Wait till you find out how babby is formed!

    Oh wait, you already did XD

  • cupcake on 09/08/2023 - 13:37

    Want a house in Sydney for under 800k.
    Good Luck with that.

  • kokita on 09/08/2023 - 14:22

    Get a 30-year loan and I think you will get approved. Talk to a broker.
    Then use the offset account to make it 15-year no interest loan, if you can accumulate the cash.

    For buying a house, you should think about your retirement. Do you want to live in that house later on until you die? or downsizing?

  • bs0 on 09/08/2023 - 14:33

    You might be able to find a better rate elsewhere if you keep asking around

  • Yoo05 on 09/08/2023 - 14:38

    You can still buy an investment property, why not, its called Rentvesting, sell it in a few years and you have a bigger deposit or equity for a dream home.

    • The General on 09/08/2023 - 20:44
      +2

      Highly unlikely that the price increase will be greater than Stamp duty, Land tax, real estate agent sales commission and Capital gains tax.

  • Slippage on 09/08/2023 - 15:28

    You have kids and currently rent?

    Yeah, you can forget about buying a house AND having savings. Pick in or the other.

  • Alias2000 on 09/08/2023 - 16:45

    My advice is to buy where you can afford and rent where you want to live. Your circumstances will change when your kids are no longer in daycare, or you might get a promotion, or your partner takes on full time work and then you can review your situation

  • Drakesy on 09/08/2023 - 16:58
    +1

    Might have to give up your hookers and blow addiction.

  • koalabargains on 09/08/2023 - 17:50
    +1

    Just wait the 20 years until your three children are adults and then buy a house.

    Why did you have three children before thinking about where they’d live..?

    • Ghost47 on 10/08/2023 - 18:02

      In 20 years’ time houses will be $4m each. Good luck to OP and his three kids if they want to own a house each.

      • qwijibo on 12/08/2023 - 16:41
        +1

        I'd say closer to $6-8m each.

        House prices double every 7 years. 20 years is nearly 3 doublings, so your average $1m house price today will be between $6m and $8m in 20 years.

        • Ghost47 on 12/08/2023 - 16:42

          Fair point. Sounds completely sustainable.

  • DeeTrance on 09/08/2023 - 18:39

    Get into the property market now.
    Ten years from now that $650k property but will probably be $850k. Assuming that is so, it is a net growth of $20k/year on avg.

    If you are still comfortable in 10 years, refinance the house, use that $200k capital growth on the house to put down a deposit for another (investment) property.

    This is all people are doing to own multiple properties. The first one is the toughest.

    • drfuzzy on 10/08/2023 - 07:55
      +2

      Not so. I found the first one the easiest.
      The reality is once you own a certain number of homes and have $2m-$3m+ of debt, banks won't loan more to you as you are a servicing problem.
      You can have heaps of equity, a high wage, and a very low LVR but it gets harder and harder to borrow.

      • eek on 10/08/2023 - 10:19

        Yes I've run into this problem now especially with the portfolio all under my name/shared name with wife on PPOR. Standard PAYG employee, LVR is dropping but portfolio is about max'd out at 3M. Similar situation to OP, wife works part time, 2 young kids that aren't even at school age yet. Even if properties are rented and cash neutral/positive, it seems to get exponentially harder. Where do people go from here? Invest under a PTY LTD entity/Trust?

  • newbo on 09/08/2023 - 19:09

    I'd say you have to move somewhere cheaper, but even the cheap places in SA are going 500k for a 3 bedroom nowadays. I guess move further and further out?

    • cupcake on 10/08/2023 - 15:03
      +1

      Broken Hill is affordable.

  • ass3ts on 09/08/2023 - 20:07
    +1

    You have 3 young kids and you "want to buy a 3 bedroom house in a low socio-economic suburb of Sydney". This usually means sending your kids to schools in the same low socio-economic area too. I know people who decided to rent out their own houses to move and rent houses in better socio-economic areas for the better schools.

    • techno2000 on 10/08/2023 - 15:21

      "people who decided to rent out their own houses to move and rent houses in better socio-economic areas for the better schools"

      I am doing this right now.

  • Alexxx on 09/08/2023 - 21:40
    +2

    It is expensive to buy into housing but rent will keep increasing while your mortgage repayments stay the same (if RBA doesn't keep raising rates). Lots of people are unhappy with the increasing rates but for quite a while there was low rates while wages were going up a few % per year. If you are willing to switch banks you can also get a few thousand in cashback every 12-18 months.

    The first few years are tough but after that you settle into it and if you have a good employment award your wages increase each year and some career progression along the way helps too.
    I bought my first house 10 years ago and it was tough for a while but 3 years after I bought I saved enough for a new car and 6 years after I bought my wages were up by 40% making repayments much easier to manage.

    I would suggest getting a 30 year loan with redraw/offset then you can choose to make higher payments equivalent to a 15 year loan. If you have an emergency then you can redraw / use the offset money which isn't an option if you go with 15 years to start with.

    Personally I like having my own place as I can change whatever I want in it, paint it whatever colour I want, hang thing on the walls, and not need to worry about getting landlord approval. I also don't need to worry about my lease not being renewed and having to find somewhere else every few years.

  • drfuzzy on 10/08/2023 - 07:52
    +1

    A better question is how do people afford 3 young kids.

    • drprox on 10/08/2023 - 08:42

      They're ok when they're young it's adult kids that are the challenge I suspect!

  • johnfuller on 10/08/2023 - 08:00

    dont buy unit or apartments, they dont increase in value like a house does hence the price difference, try find a house on a decent sized land 500sqm, one day when its re-zoned it will be worth more to a developer, and one thats not on a strata title

    when i started out, i was only earning 45k, was doing a side gig repairing phones from home and kept my head above water, you need to do something extra, maybe one day that will be your primary source of income

    additionally, your loan terms will be 30 years but you pay it off extra every week by adding more into the account which pays off the principal (cost of the house) and ends up becoming a 15 year term, for the first year, you can pay interest only, hell if you really wanted to, you could pay interest only until you die (bit like rent), but the repayment amount will always be the same and your never actually paying off the cost of the house

    yes, there are additional overheads for a house; maintenance, water, electricity, council rates, possibly strata if its a townhouse or something on a strata title

    its always cheaper to rent, its never going to be your house, you get kicked out, have to move again (what does that cost you every time, mentally, physically and financially?), you know what its like ..

    there's two kinds of people in this world, the renters, and the buyers .. which one are you?

    • IMadeYouReadThis on 10/08/2023 - 09:47

      so you saying its ok to rent but not ok to buy unit? Terrible advice….

      Yes, house is always better than units (even a first grader will say that) but you gotta have to look at your borrowing capacity and what you can afford… Its one thing aspiring to own a house and its another thing to realise what you can really afford.

      • johnfuller on 10/08/2023 - 10:57

        i said its cheaper to rent..

        its not ok to buy a unit when compared to your options of buying a house on land

  • dmcneice on 10/08/2023 - 09:00
    +6

    I'm in a fairly similar situation OP. My post tax income is slightly less (its variable, but usually 120-140k post tax). My wife hasnt worked in over 2 years (not through lack of trying - just the jobs market for her is abysmal). We got an average house in our neighbourhood at 1.3m. When I bought (Jan 2022), mortgage was around 3.8k-4k/month (don't remember exactly). Its now over 7k/month. Not gonna lie, its rough. No holidays, no restaurants, no extra-curricular activities. House overheads add up as well big time. I'm with you, I honestly don't know how other people can afford to live, especially when comparatively, we earn so much more than the rest of the population. Rents here are over 1k as a start for houses.

    • mandelbrot on 10/08/2023 - 11:06
      +6

      Almost 70% of your household after tax income is going to mortgage payments. That's what you definitely call mortgage stress!

      • johnfuller on 10/08/2023 - 11:14

        almost everyone overseas has it harder than us.

      • dmcneice on 10/08/2023 - 12:36

        Yep I certainly feel the stress. I hazard a guess most of the people that live where I do (at least the renters), a lot of them are over 50% just for rent (I know quite a few friends are).

    • meumax on 10/08/2023 - 13:36

      You're getting ripped off on your current mortgage rate if your repayments have doubled.

      I borrowed approx $1M and refinanced from 1.99% to 4.34% when my fixed term expired in Jan. It's currently at 5.34% with all the rate increases yet my repayment has only gone up from $4k/month on 1.99% to $5.7k/month at 5.34%.

      So mine hasn't even gone up by 50%. If your repayment has doubled, you need to get onto your bank and demand a better rate or refinance to a bank with a better rate.

    • us3rnam3tak3n on 11/08/2023 - 13:04
      -1

      I would say if you haven't found work in your industry in 6 months it's time to consider retraining.

  • D3m3ntia on 10/08/2023 - 09:35
    +5

    That's about 230k gross, which is more than 2 average salaries and about 3 median salaries. Where doth thou money go?

    Have you been talking to the Westpac guy about high yield investments??

    • xers on 10/08/2023 - 11:27
      +1

      I don't know where people keep pulling the 230k gross figure from. 150k after tax dual income is equivalent of around 200k gross only.

      • dmcneice on 10/08/2023 - 12:37

        OP is single income household….thats where he pulled it form, which works out to be around 230k

        • xers on 10/08/2023 - 12:41
          +3

          No he's not. His wife works part-time… Says right there in his post.

      • D3m3ntia on 10/08/2023 - 15:43
        +1

        At the end of the day, net/net it doesn't matter, because it's the same, maybe even better for certain benefits if their net is the same but gross is less because benefit tests are all on gross.

        The point is they can still afford the loan if they don't buy high yield investments. We managed to buy similar with less and at a higher interest rate and no stamp duty exemptions.

  • ataraxia on 10/08/2023 - 09:56
    +1

    Sounds like you could afford it in some capacity. Try to simplify the equation.

    The difference in rent and mortgage repayments needs to be saved and invested in order for that to be a smart financial decision.

    So the real question is will the savings from renting (keeping in mind rising rents over time but wont end up with an asset) vs mortgage (variable rate changes + capital gain and own the asset)

    Snapshot of median rent in Blacktown lga 2008: $300 / 2019: 420 / 2023: 520
    Snapshot of all housing in Blacktown 2008: 350k / 2019: 730k / 2022: 989k but dropped at the end of the year to 883k

  • ashftc on 10/08/2023 - 11:47

    Buy a 3 bedroom house if you can get a loan. Houses won't be getting any cheaper. It looks very difficult in the beginning but it keeps on getting easier as time passes by. Income increases, childcare will soon be over. Another solution is if you do actually struggle, rent out one of the rooms to an individual like student or working professional. Easy $250-$300 a week for the time being while you're struggling. Don't aim to pay off your loan early now. As and when time passes by and you get financially stronger, you can start paying more than minimum repayments and automatically your loan period will come down and so will monthly interest expense. This will happen with time. I bought my first property with $520k loan when our monthly after tax income was around 9.5k a month (no kids) so kind of similar ball park. No family support either. There is no reason you should delay if you want to buy. Delaying it would make it even worse and you know this.

  • xers on 10/08/2023 - 11:50
    +2

    The more I read these topics and comments the more I'm scared of having children because of how much they seem to cost.

    Our income is similar to OP, only a tad bit higher but we have been consistently making 9k-10k repayments towards our mortgage/offset on average with not much compromise to our lifestyle at all. The 3 children must be costing quite a bit if OP is struggling.

  • Yogojunzo on 10/08/2023 - 12:10

    How about rentvesting? Renting in Sydney then investing on other states. With this, you get to gain from capital increase building you wealth while renting. Check out Property investments by PK. 😁

  • tephra on 10/08/2023 - 13:44
    +1

    A mortgage repayment of $3.8k is just over 30% of your monthly after tax income.

    Which is fine… You will have nearly $9k left over.. each month… If your burning 9k a month on living expenses then your doing something wrong…

    Ignore advice from the US, its irrelevant to the market here.

    My advice, either work out how to cut down your current spending or live with renting for the rest of time.

  • PaperplaneXXX on 10/08/2023 - 17:27
    +1

    OP doesn't understand that the money devaluation is very fast. Therefore 1 million dollar mortgage in 5 years - OP would be laughing in repaying that easy.
    especially with the inflation spike. The inflation normally was 2-2.5 % but now is higher.

    over the past years if you see the value of money in relation to house prices - its crazy!
    it might be a good indicator of real cost of money or value of money.

    first years always hard and mentally also.

    I am paying two mortgages and happy . why? because I dont spend all that money and they go into mortgage :-)) otherwise I would have spent.
    lost so much time already over years waiting for house prices crash

  • gakko on 10/08/2023 - 17:44

    Isn't there a fed government co ownership co contribution scheme? Wouldn't be shamed at all to use that. Amazing program.

  • MessyG on 10/08/2023 - 18:48
    -1

    OP it might be better to look a bit further out than where you wanted and try to WFH as much as you can, if you can. Sydney property prices are disgusting for many reasons and I feel for you. We left in 2015 and bought in Melbourne when we couldn't get anything for $700k and it's so much worse there now. We still had to go a bit further out in Melbourne than we wanted but the suburb has already appreciated well.

  • Bludgeman on 10/08/2023 - 22:43
    -1

    Invest in sports and pokemon cards, not property.

  • tonka on 10/08/2023 - 22:52

    Don't disregard units, strata is more, but maintenance is a lot less money (and effort). And a lot of units are still undervalued compared to housing after co-vid.
    If you do look at a house look for older house zoned low density that could be rezoned as gov't pushes for housing solutions. ie old low density area near shop or train. Maybe 1 back from a main road and bus route.
    In Sydney consider renting so you can stay more mobile as work and life evolves. Sydney commuting is soul destroying. Instead buy where you can imagine retiring, live in it briefly every 6 years so you can negative gear your whole life and not pay capital gains tax. Do the maths though, historically you may have been better off salary sacrificing to super and buying when you retire.

  • pogichinoy on 11/08/2023 - 04:40

    I don’t see the issue here.

    Whilst kids are expensive, let alone 3, you sound like you can afford it.

  • Squabo on 11/08/2023 - 07:09

    First 5 years are hard, but assuming interest rates don't move your repayments stay the same for the life of that loan, but your income goes up by 2ish% every year.

  • emmalovestravel95 on 11/08/2023 - 07:12

    $150k is a great income and a great amount of savings, well done. We earn a little less than this (in NZ) and we're finding it very difficult to get by. I keep tabs on this forum to gauge what things are like in Australia and whether a move is on the cards. Fortunately we were able to tap into some government assistance to get us over the line for a house deposit (I don't think enough Kiwis know about this https://unitymoney.co.nz/get-a-loan/first-home-loan/am-i-eli…). Keeping up with the mortgage is reaching scary levels at the moment. Any Kiwis on here struggling as much as we are?

  • May4th on 11/08/2023 - 07:14
    +1

    Basically OP wants the security of a home without the financial stress of a mortgage and does not want to change his/her lifestyle which is based on a (low for sydney)475/week rent . You are putting a double buffer - 15 yr loan (massive increase in repayment) and 30% (this is arbitrary calculation is PRETAX, at higher incomes your living expenses make up a lesser % of your spending/income so this figure is not a be all and end all)

    So either put up with the higher repayments or settle for whatever loan size you are comfortable with, which won't get you very far if you are set on buying a landed property in one of the most expensive cities in the world, if you don't want to make sacrifices. There's no reason you can't service 800k loan (around 1mil property, plenty of options in west or southwest sydney within 40min commute to cbd) on 150k after tax which is a very good income

  • BluebirdV on 11/08/2023 - 07:54

    Will house prices keep growing at rates higher than or comparable to the stock market forever? Won't that mean almost nobody can afford a house? Won't prices have to correct at some point relative to income?

    • Tomhaigh1 on 11/08/2023 - 08:02
      +1

      Apparently it doesnt work like that in Australia, with record immigration there will always be demand.

    • star-ggg on 11/08/2023 - 10:59

      You're equating houses with homes because that is a fundamental part of Australian psyche (and also yes why houses in our major cities will always be expensive relative to wages). The sticker price of homes will always be accessible for people, but the size of the homes will get smaller and smaller. High density living in urban environments is inevitable. Australia is only catching up to the rest of the world.

  • mandelbrot on 11/08/2023 - 08:09

    Sit down and work out a monthly budget. After a $3724pm ($45k pa) mortgage payments, you've got about $100k pa after tax for all other spending. That's a lot of money for the majority of families. So can probably save 1/3 of that and leave it in the offset.

  • sashatheman on 11/08/2023 - 08:19
    +1

    i'll just comment that maybe its a US thing in which they don't have offset accounts, but in Australia most banks offer an offset account with the mortgage, so getting a 30 year loan is better as it means the repayments are reduced but you then put any excess cash into the offset to reduce the interest repayments.

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