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

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

Hey OzBargainers,

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

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

Situation is as follows:

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

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

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

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

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

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

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

Financial Home Loan Loan

Comments

  • drfuzzy on 21/07/2024 - 16:06

    Alot of information missing. This isn't a poker game where you protect your hand - it is financial planning.
    You haven't mentioned how old you are, what your net assets are, what your gross income is, what other investments you have, how much super you have or what your long term plan is for retirement.
    Start there then tell us about your pre-approval for the mortgage.

    • franklowe23 on 21/07/2024 - 17:48

      Sorry I thought I was actually quite informative, but yes I was missing the stuff you have listed:

      • Age: 41
      • Net assets outside of super: cover the deposit plus a couple of hundred thousand in "emergency" buffer (all in shares / ETF's at the moment - deposit held in cash)
      • Super: will cover us in retirement
      • Pre-approval: fully assessed pre-approval at $1.69m (whatever fully-assessed means).
      • drfuzzy on 21/07/2024 - 20:41
        +1

        That helps a little although the super response is a bit vague. I'll assume you have at least $500k in superannuation today between you both and hopefully alot more than that.

        What you propose is achievable provided you both enjoy your work and have secure careers. You'll need to keep at least 12 months expenses as a buffer while 24 - 36 months would be better given you have young kids to worry about. If you take a 30 year loan you'll be working until you are 70+ unless you find a way to increase your repayments or you have millions in super.

        I took on $2m+ in debt from age 33 peaking around $3m in debt around age 40. It places some additional stress but is manageable. I didn't have kids or a partner to worry about though.

        • franklowe23 on 21/07/2024 - 20:52

          Thanks for your comments on debt - makes me feel a little less crazy (not sure if that is good or bad :-))

          Slightly off topic from my original post: Super is an interesting one - I say we will be fine and we will be as our super isn't insignificant (it also isn't $5m!!), but only if govt's not meddle too hard in the super system.

          The problem with Super is it is a double edged sword. It is an amazing savings vehicle and one which we have prioritised highly, above putting a roof over our heads (outside of renting of course), for the majority of our career. The problem is as govt. debt mounts, govt. expenses grow and the population ages (less income tax payers) super is open to govt. meddling and they just can't keep there hands off it and I can't see that changing.

          Until Aust. has major taxation reform Super will remain the plaything of govt. and us such the risk of not ending up with what you expect come retirement rises rapidly.

          As such I left Super out of my original post and it isn't really useful for servicing our debt during our working years (and I hope that remains the case - aka I don't like super access for housing even if it would make our life easier).

          • pnt on 22/07/2024 - 12:44

            @franklowe23:

            If you take a 30 year loan you'll be working until you are 70+ unless you find a way to increase your repayments or you have millions in super.

            I believe, when 60 (in 19 years time), you'll be able to withdraw a lump sum from your super, and you'll likely use that to pay off the balance of the loan. By then you'll likely have so much money in super (provided you work for 19 more years on that income, and the super compounds with investment returns), you could choose to retire or keep working if you enjoy it.

            • samfisher5986 on 22/07/2024 - 12:54

              @pnt: You are assuming that they would want to live off the pension.

              • pnt on 22/07/2024 - 18:08

                @samfisher5986: On that income, keeping good health and employment, I would think the asset test would prevent them from qualifying for the pension.

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

                  @pnt: Unless something really bad happens to us then I don't think we should be given the pension. Many people are much more deserving of that.

            • franklowe23 on 22/07/2024 - 21:06

              @pnt: Yes fingers crossed for that outcome!

              Of course Super isn't risk free as Govt's keep meddling, so you never know what is around the corner in that regard.

  • t_c on 21/07/2024 - 17:09

    Have you thought about going to med school and making a decent income?

    • dp1 on 21/07/2024 - 18:27

      Assuming they already have a relevant undergrad degree for med school entry, the earliest possible graduation from med is January 2029. Starting salary is $80k the first year. About $110k by the time they are 50 years old. Then they will applying for a specialist training program which will be 3 to 6 years starting at $130k salary. They will never be able to make up the lost income before retirement, never mind buy a house.

      • t_c on 21/07/2024 - 21:15

        4k a day, Locum.

        • franklowe23 on 21/07/2024 - 21:44

          I don't think you want me making recommendations on your medical future - just saying.

        • dp1 on 22/07/2024 - 12:51

          There is a niche demand for experienced locums, and they are paid very well to run the major trauma unit, ED or ICU for example, but nobody is paying someone only 2-3 years out of med school 4k a day.

        • MarsTitan on 22/07/2024 - 13:15

          Seriously considering it.

          Screw 10 years of training to be a surgeon.

          • May4th on 22/07/2024 - 14:10

            @MarsTitan: 10 years? can take that long just to get into a program.. think 4-6 years medschool+2-3years intern/resident, anywhere between 1-10 years in the wilderness as unaccredited reg and then 4-6 years training. then most do a fellowship and try to find a job / set yourself up somewhere. they do get a lot more than 4k a day at the end of it all though

          • franklowe23 on 22/07/2024 - 21:09

            @MarsTitan: GP seems like a great gig (assuming you are ok to being coughed on lots). Plenty of them seem to work very flexible hours, so they mustn't need the money.

            • sim777 on 23/07/2024 - 15:25

              @franklowe23: GP is great that provides you with a fairly comfortable salary whilst working part-time but if you are wanting to really earn the $$ you'd need to consider specialising.

        • sim777 on 23/07/2024 - 15:10

          What medical specialty offers 4k as a locum. Anaesthetist? Neurosurgeon? Good luck for the next 10 years of absent work/life balance and minimal wage until you are board-certified.

  • 2esc on 21/07/2024 - 18:38
    +3

    Do you actually need a house that expensive is the first question and its a important one. Why do you need that house? Impress people? Your family and friends live in similar homes? Does it shorten your commute time?

    Last loan i took out it worked out about a third of what the bank was prepared to loan me. Less stress plenty of room in case something went wrong and then i pay extra to get it down quicker as well.

    Seriously review your expenses the majority look high to me.

  • FlyingMiffy on 21/07/2024 - 18:47
    +1

    We're probably in similar income brackets and family size. Generally speaking, something between 90K and 100K each year seems to be where we land in outgoings each year which includes a budget for a O/S holiday. So with a bit of tightening, sure, there should be some room to move based on your current budget. But i reckon the watch point is your savings rate. Unless you plan of doing a full 30 year mortgage, you will need to do better than 10-20K in extra principle payments to bring that in. We're lucky in that we just finished paying off the home and what you are now estimating as your mortgage, we are looking at directing to investments.

    • franklowe23 on 21/07/2024 - 21:00

      Thanks for your outgoings input: my commonsense brain says $90k-$100k should be an achievable mark for us too and I'd love to squeeze a simple OS holiday into that number as well (surly that is doable).

      It's funny I don't think of us as living expensively, and in a lot of ways we most certainly don't (cars, clothing, food etc), but clearly a lot of money is racing out the door ($114k last year) and one doesn't notice it unless one looks closely.

      Hoping not to do the full 30yr mortgage, but I guess one needs to know that is what they are signing up for when one takes out a 30yr loan. I hope that incomes rise faster than our expenses, but we are later in our careers than you average FHB so this is not a sure thing in our case (different if you are 28yrs old).

      • FlyingMiffy on 22/07/2024 - 09:58

        When i started budgeting, the number was closer to 60-70K but inflation really did kicked in over the last 2 or so years and when you apply that increase to every category of outgoing, they really add up.

        We were also the same with income. I reckon the 25-35 mark saw a considerable increase but that has slowed post 35 so it might be better to focus on reducing costs. Good luck mate with the planning and home buy!

        • franklowe23 on 22/07/2024 - 21:10

          Thanks, appreciate it!

  • serpserpserp on 21/07/2024 - 21:02
    +1

    Wow over 50% of your wage is crazy. Good luck with it all.

    • franklowe23 on 21/07/2024 - 21:09

      Yep it would be 50% of net income, ~35% of gross income.

      • serpserpserp on 21/07/2024 - 22:17
        +1

        50% net income sounds scary to me. Good luck though. You might be young and have 30 years or more to pay it off. So best of luck

        • michaelTito on 23/07/2024 - 10:30

          The interest on that alone is like what 9k a month? Banks will love the OP

  • CalmLemons on 21/07/2024 - 21:38

    I'm sorry but why did you use /fn fortnight?

    I've never seen someone use that before is it specific to your industry?

    I deal a lot in loans and businesses, you sound like you are more than capable of working out affordability yourself.

    I would focus on how your income could possibly increase?

    That's a massive loan for some place in the ACT - if that is where you live?

    Your expenses are on the lower side to be honest. Don't forgot buying nice things etc. If you're in a $2m+ house, you're probably going to have $50k worth of appliances and electronics at least.

    • franklowe23 on 21/07/2024 - 21:43

      Per fortnight because I am paid per fortnight and the bank allows the mortgage to be paid per fortnight. Would you recommend a different standard measure?

      Income could increase, but I wouldn't bank on it given our age (different if you are 28yrs old).

      ACT property ain't cheap in the inner areas and it also isn't quality - which means a $2m+ house isn't actually nice. Not like I think of nice anyway, as it is sitting on $1.4-$1.6m of land, which you don't even "own" (99yr leases in the ACT).

      • serpserpserp on 21/07/2024 - 22:18
        +1

        Make sure you pay your mortgage weekly. You save on interest

        • us3rnam3tak3n on 23/07/2024 - 10:22
          +1

          Common misconception. Pay it as soon as you have the funds.

          If you are paid fortnightly and pay mortgage weekly you are withholding the second week each fortnight and will actually accrue more interest.

          • franklowe23 on 23/07/2024 - 13:41

            @us3rnam3tak3n: I guess it makes little (no) difference if you are holding all spare working cash in your offset account.

      • CalmLemons on 22/07/2024 - 18:17

        What? Are you for real with the 99 yr leases in the ACT? Thought only China does that.

        I could look this up myself but that is the first time I have heard of that.

      • sim777 on 23/07/2024 - 15:26

        At least the property market in ACT is regarded as the best for growth? second probably Bris?

  • JakeyJooJoo on 21/07/2024 - 22:16
    +3

    Do you have any other options OP?

    Perhaps a middle ground between your current rental, and this substantial loan?
    If so I'd seriously consider that.

    A few years ago, my wife and I were in a similar situation. For me, being trapped into that job wasn't something I could handle. Ended up buying a 30% cheaper house a couple of suburbs over than the one we wanted.

    Our house has annoying flaws, and the suburb is kinda mid range quality. Semi regularly I think about how it would be nice to upgrade… But ultimately for us it was the right decision. Managing the interest rate rises haven't been remotely stressful compared to what they would have been.
    Having the smaller mortgage has allowed us both to reduce hours to part time. More family time. Can't really put a price on that.

    • franklowe23 on 21/07/2024 - 23:28

      Thanks.

      The options in our school catchment (and we'd prefer not to move schools at this stage) are continue renting or buy - we're certainly not buying at the top of the price range in the catchment - much closer to the bottom than the top.

      • serideth on 22/07/2024 - 08:01

        Why the big reluctance to move school? Likely the kids will have a whole new group of friends once they reach high school in under 5 years time meanwhile you might be stuck in a mortgage with 25+ years left and hundreds of thousands of additional interest compared to a "cheaper" suburb

        • franklowe23 on 22/07/2024 - 21:12

          Yep we could be worrying about nothing - so hard to predict the future.

      • JakeyJooJoo on 22/07/2024 - 09:06

        Yeah school catchments are such a pain - our eldest hadn't started school yet so the move was easy. Can appreciate how world ending that would be for your kids.

        A few thoughts on this:
        Your kids are all primary school age - does the highscool catchment differ, and have cheaper housing?
        Pursue catchment loopholes?
        NSW public schools are a bit cagey on the info, but generally the way it works for most schools is that once enrolled and started, you can move out of the zone and still have your kids attend that school without issue.
        I'd maybe look at buying a cheaper place a few suburbs over if there is anything appealing, somewhere you'd be content in the future. Then, continue living in rentals in the kids school catchments until all kids are in highschool - then slide on over to your PPOR when ready or reassess your finances, sell PPOR and buy a new house with a lower mortgage. A bit of stuffing around but totally depends on your comfort level taking on that amount of debt, my risk appetite is low hence these thoughts come front of mind.

        • franklowe23 on 22/07/2024 - 21:13

          Thanks, yes these thoughts have been on our minds too (regarding the buying elsewhere, but continuing to rent in the catchment for a few years).

          • localhost on 22/07/2024 - 22:01

            @franklowe23: Consider this - if renting is cheaper and you are in the good suburb, just don't buy yet. Keep investing and growing your nest, don't think property with $1.7 price tag will cost more in a year. If situation changes - like finding a better and cheaper property or landlord is not happy with you then you might go and buy.

            • franklowe23 on 22/07/2024 - 22:05

              @localhost: Yep it is certainly an option and one we have thought very hard about (and actively pursued for many years).

          • dtc on 23/07/2024 - 10:30

            @franklowe23: Which high school are you planning for the kids to attend - Lyneham?

            The ACT policy for schools is 'If you have moved to the ACT and have a temporary residential address, you are eligible to enrol at the local school for that address. If you subsequently move, you can choose to continue to stay at the current school or enrol in your new local school.' https://www.education.act.gov.au/public-school-life/enrollin….

            So your kids can stay in their primary school even if you move out of the catchment area; so the catchment issue only becomes relevant for their high school. Hence (for example) if you pick a house in Downer (a bit cheaper than O'Connor) then you are in the Lyneham High catchment area. Not that Downer (or the parts of Watson that are in the catchment) is cheap; but you might be able to get something for $1.5 to $1.7m that is pretty new/renovated/large and knocking 10% off the purchase price will make a good difference in terms of budgeting.

            • franklowe23 on 23/07/2024 - 10:39

              @dtc: Yes correct it is the high school catchment that is the issue - they are locked into the primary school catchment based on our existing rental.

  • Aerith-Waifu on 21/07/2024 - 23:22
    +1

    Forget about how much you have now and how easy is to trim down your expenses, the real question should be what if something happens and one of you cant work for 1 year.

    Is your current income and savings enough to sustain the bills for 1 year if only 1 of you is working?

    If the answer is no, then you should save more before commit. (Not Financial Advise)

    • franklowe23 on 21/07/2024 - 23:26
      +1

      We have insurance in place that is meant to cover these circumstances, but as with all insurances you never know if it will payout until you need to claim.

      • samfisher5986 on 22/07/2024 - 09:16
        +2

        Make sure you check your insurance properly, a lot of them don't work as people think they work and are actually pretty useless in a realistic scenario.

      • Aerith-Waifu on 22/07/2024 - 17:01
        +1

        I am talking about none insurance related events, such as redundancy and also need time off due to other events insurance is not part of the play

      • moneyhungry on 22/07/2024 - 19:51
        +1

        This place is full of peasants looking for bargains, wrong place to ask as they cannot grasp numbers as large as this.

        • franklowe23 on 22/07/2024 - 21:16

          I love a good bargain and also struggle to grasp numbers this big :-)

  • yoquierotaco on 22/07/2024 - 00:08
    +1

    Your remainder after mortage is more than our net. You’ll find ways to make it work (you have 3 kids so I’m sure you know more than most). If you haven’t started tracking your expenses, start now and you’ll find plenty of ways to trim expenses.

    Offset account really gave us flexibility and peace of mind in case of any emergencies. But we had to have a variable portion of the loan which kind of suck the last year or so.

  • Smol Cat on 22/07/2024 - 00:28
    +8

    If a family making that much money is struggling to get a decent house and mortgage, what chance do the rest of us plebs have? Our society is turning into an absolute joke.

    • franklowe23 on 22/07/2024 - 20:29
      +1

      Could not agree more! It is a complete mess!!

  • singlewind on 22/07/2024 - 01:19
    +3

    Really not recommend buy a house now. Can you afford one of you lost job and still be able to survive? If not, the life will crash your mental easily. Australian economy like Canada, heavily relies on resources and most likely going into recession too. In the past, interest rate can remain 10% for 5 years. I recommend you remain renting and raise kids in developed area to get as much as public services you can. Spend money on kids education and enjoy your life. I know you may feel uncertainty if you don't own any own land.

    If you expect your income is growing quickly in the next 5 years, then go for it.

    • franklowe23 on 22/07/2024 - 20:30

      I agree with a lot of your points.

      Likely we are going into a period of higher rates rather than lower rates - hopefully for working families this means higher pay as well.

  • localhost on 22/07/2024 - 02:24
    +1

    If you are with CBA they have very good spending stats (assume other banks have it as well). Check what you have spent in the last 1-2 years, add 10-15% on top of that for next few years and do the math again.
    Also it doesn't matter loan is too high if its manageable. Just make sure from your monthly income you put extra $1-2k into offset. Just in case and for safe buffer.

    Also make sure you have enough money after settlement for extra expenses - insurance, repairs, furniture, utilities, etc…
    You can ask for a little hire loan - like $1.7 or get a little cheaper house, like $1.6.

    • franklowe23 on 22/07/2024 - 20:35

      Good point thanks. I have CBA accounts, but no spending really goes through them as it is all on the credit card and sadly the card provider doesn't have a similar system to the CBA one.

  • pulpfiction on 22/07/2024 - 08:53
    +1

    I've always done my comfort calculations based on 10% interest rates. I don't want to be forced to sell in a bad market.

    Based on this, you're cutting it real close. If your income is disrupted you'll also be on a rapid path to distress. This depends on your work. You've been pretty unclear on jobs, but I'd limit "secure jobs" to medicine (primary care) and law.

    If you have no other option, then roll with it and see how you go - the downside risks is still relatively low. If you can find a cheaper house to get out of renting, then do that.

    • franklowe23 on 22/07/2024 - 20:36

      Yep would be very tight at 10% without incomes rising as well.

  • spal on 22/07/2024 - 09:20
    +2

    Reading your response OP, I believe that you are self convinced that you can make it work. You have a pretty significant buffer of $1800/FN.

    If currently where you are renting that works for you, then you do have an option to rent out your home until your spouse goes back to work. The income renting and the tax deductions on expenses is most probably put you in a better financial situation. Consider the value of the mortgage, it does not look like that you were going to get any first home buyer benefits anyway. With your income on higher tax bracket , the deduction will be higher at 47% too. Rental yield has grown due to rent increases. Further, eventually, it is expected that the interest rates will come down a bit, which will improve your cashflow too. Although, a major risk would be to get a reliable tenant.

    • franklowe23 on 22/07/2024 - 20:39
      +1

      Sadly the place we are currently renting is very tight for our family now and hence the drive to move on.

      I think we can make it work, but I always have the nagging question of am I missing something that turns out to be vital. Particularly around home expenses (as I've never owned one) and kids as they get older.

  • samfisher5986 on 22/07/2024 - 09:21
    +1

    At least in my opinion, you are taking on extra risk due to the loan size, you having kids and pets and that if something were to happen to your income, you don't have a lot of options due to those kids and pets. For example you can't rent an extra room and you would likely struggle to find a rental so you can rentvest due to the current rental market and the fact that you are 5 people + Pets.

    I guess you could always downsize in the future if there was an injury or job loss.

  • ForkSnorter on 22/07/2024 - 09:37
    -1

    I don't know how you people who take out >$1 million loans sleep at night. In my opinion, this is what's wrong with the Australian property market and it's why our property prices are so high. The bar for financial insanity keeps getting pushed higher.

    For reference, the biggest loan I've ever taken out was $90,000, and I paid it off in 2 years. I currently own my own house, with my girlfriend, in a desirable location, and we have no mortgage at all. It's nice to have a property under the belt with zero obligations to banks. Gives you a real sense of freedom to decide what to do next.

    • May4th on 22/07/2024 - 14:52
      +5

      that's the reality if you want to live in a capital city. you either live regional or very old, or both, if you've never had to borrow more than 90k

      • ForkSnorter on 22/07/2024 - 15:27

        You're right, prices are getting a bit ridiculous. But no, I'm not very old, and don't live regional. I saved up for ages (12 years) instead of borrowing heaps. Then I bought something modest and small that I could pay off quickly before upgrading. Then GF and I bought something modest and small again that we paid off nearly instantly and are slowly renovating it. With this strategy, we have saved hundreds of thousands in interest, and we can use that money we saved to renovate the house.

        From my knowledge of the market, you now need around $900k to get a decent house (not apartment) in a decent area in Brisbane, a bit less than that in Melbourne, and even less in Adelaide and Perth. With a 20% deposit, you would need to borrow about $700k. I wouldn't do it, but I guess that is the reality now.

        Keep in mind, you can find houses cheaper than this if you can put up with a bit of a commute to work, or if you're prepared to renovate it or extend it in future, or if you buy an apartment instead of a house.

        • May4th on 22/07/2024 - 17:26
          +3

          sadly even a 1bedder shitbox apartment in sydney in a neighbourhood that you'd sleep with a knife under your pillow is still 450-500k nowadays. yes it's a bit sad that you have to choose between a lifetime of slavery, commuting 3hrs each day, living in a van or sell both your kidneys

        • DingoBilly on 23/07/2024 - 07:30
          +1

          Sounds like you were lucky and timed it right. If you did it around the global recession prices were fairly stable so saving for 12 years is fine.

          If you had saved for the last 12 years you'd be behind someone who just bought a place with a loan. When prices go up close to 50% in 4 years and the starting price is $500k minimum you can't outsave that.

          • ForkSnorter on 23/07/2024 - 08:00
            +2

            @DingoBilly: I saved $260,000, then bought an apartment for $350,000 during COVID (house prices were up, but apartment prices were down). Sold it for $450,000 2 years later, then I and GF bought a crappy, tiny house in a nice area during the slight drop in prices in early 2023. Yes, I/we timed it reasonably well, although we really should have bought a house in 2019 or early 2020. That would have been timing it perfectly. The people who did that are laughing now.

            I just read a Real estate .com article about Robertson (Brisbane). Then I checked the sold prices. If you had bought a house in a boring suburb like Robertson for $700,000 in 2019, you could sell it for over $2 million now. With a decent renovation, you could sell it for over $3 million. Not kidding. Check the sold prices. It's just insane. Couldn't make it up. Robertson is stranded by traffic congestion on all sides, with nothing remotely interesting nearby. Just an example of how ridiculous our property market is.

            • eek on 23/07/2024 - 09:51

              @ForkSnorter: Robertson itself is a geographically very small suburb though. It's also had a long history of south-east Asian buyers and owners in the suburb. It's right next to Sunnybank, has a reasonable primary school and relatively close to the CBD. Quite a lot of houses at Robertson are also on decent plots of land and large houses - luxury builds from the late 80's to 00's. Still has a reasonable flow of of knock-down and rebuilds or subdivisions as Chinese prefer to live in brand-new builds.

              • ForkSnorter on 23/07/2024 - 10:21

                @eek: Yeah, maybe an OK suburb if you want to spent your entire life either at home or at a busy restaurant. To go anywhere interesting, you would have to drive for at least an hour through horrible congestion. I wouldn't live there if it was free, but each to their own.

                • eek on 23/07/2024 - 10:30

                  @ForkSnorter: I've found many immigrants who have come from large high density cities in SE-Asia like Tokyo, Taipei, Hong Kong, Shanghai etc will find Brisbane to be a very sleepy, slow-paced, country town 20+ years behind in terms of public transport, services, food, amenities etc. They won't find it to be busy or congested at all.

                  Good if you want to go to the beach, hiking, camping (ecotourism) or go out and get drunk at night since everything is closed by late afternoon. It is a good place to unwind, slow down, raise kids away from the hustle and bustle. Depends what part of life they're in. If you were a "DINK" absolutely would no be living in Brisbane, but raising a young family, yes, sure.

                  • ForkSnorter on 23/07/2024 - 10:42
                    +1

                    @eek:

                    Good if you want to go to the beach, hiking, camping (ecotourism)

                    This is what I mean. Nowadays, from Robertson, you have to drive through incredibly congested traffic to get to any of these places.

                    It used to be OK, about 10-15 years ago, but it's just not enjoyable to go on day trips from many Brisbane suburbs nowadays as a result of the traffic congestion and unreliable public transport.

                    • eek on 23/07/2024 - 10:53

                      @ForkSnorter: I think starting from Friday afternoons and Saturday mornings would be HELL on the M1-Gold Coast direction or Bruce Highway up to Sunshine Coast. I imagine Sunday afternoons back to Brisbane would be HELL again

    • jm7 on 22/07/2024 - 16:48

      How long ago did you buy your house?

      • us3rnam3tak3n on 23/07/2024 - 10:30

        ICYMI

        I saved $260,000, then bought an apartment for $350,000 during COVID (house prices were up, but apartment prices were down). Sold it for $450,000 2 years later, then I and GF bought a crappy, tiny house in a nice area during the slight drop in prices in early 2023.

    • franklowe23 on 22/07/2024 - 20:41

      Trust me I don't like and I acknowledge people like myself buying these houses are part of the problem. Sadly it is the reality of current Australia and I'll love to be able to vote for a Govt. that pledges to make houses cheaper.

  • ddilrat on 22/07/2024 - 10:57

    I think if you're already spending more than the 4250 then you cannot afford it.

  • Prosp24 on 22/07/2024 - 11:18

    Nice income, but massive loan/mortgage.

    I wouldn't focus too much on small details, they are likely to change over the life of the loan, just like interest rates (i.e. life happens)
    Remember that income and spending are rates of change and that income x time = equity (i.e. you'll need to sustain those numbers for a long time to build equity to pay that mortgage down.)
    I've found that doing the maths around how much percentage of your repayments go to interest and how much pay down principal is useful when managing a home loan.

    For example, you might be able to easy afford to hold a loan, but not see it go down much over time (e.g. for example if only 20% of repayments go to principal (rest to interest, and rates stay elevated)). Its a bit circular, as the more your loan pays itself down, the faster it will also pay itself down, and so you spend a lot of time at the top if you have a large balance, relative to your repayment amount.

    For example, from memory under my own circumstances and calculations/projections, the ability to pay down 30% of my loan balance immediately would result in a long-term total saving of approx 50% of the total loans cost (again assuming rates and other variables remained elevated and stable). In terms of time saved, this could halve a standard loan duration from 30 years to 15 years.

    So its not linear or apples for apples (more of a curve), hence why so many will advise you to allow wriggle room to be able to pay down the loan faster than just minimum repayments.

    Circumstance is heavily dependent on interest rate speculation, as the conditions from 2011-2021 are completely different to now. Your circumstances (taking out a big loan) would have been more ideal for a low interest rate environment, in which the principal could be chipped away at more aggressively from a higher balance.

    This is general commentary only, as i dont really volunteer to read into individuals details, hopefully its helpful

    • franklowe23 on 22/07/2024 - 20:46

      Yes thank you. Compounding interest is an amazing thing - sadly it works against the loan holder when loan sizes are big, like we are talking about here.

      I personally don't think we will see 2011-2021 interest rate environment for a significant period. We've entered a period of higher rates and this is probably a good thing for society (bad for me) as it should reduce speculation on assets like housing as they become much more expensive to own.

  • pnt on 22/07/2024 - 12:12
    +2

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

    • Family of 4, 2 teenagers. Public schools. 1 overseas holiday, 2 cheap cars.
    • Numbers seem ok - yours 110k/yr vs mine 93k/yr - 22k/per person/yr vs 23k/per person/yr.
    • I feel very much not-rich on that expenditure. I feel it's not worth spending less.
    • Other category is not excessive - similar to mine per person - and each expense in isolation seems worth it when I look at each.
    • The lender will likely have looked closely at your last years expenditure, and you have too, so you probably know it is accurate.
    • It's hard to find information on what people spend - most people don't have an accurate budget or know, or they don't share accurately, or don't share due to privacy.
    • The ABS for 2016 had some rough numbers on expenditure by family composition (you could adjust for inflation for another perspective) -
      https://www.abs.gov.au/statistics/economy/finance/household-….
    • It is sad that high house prices make otherwise rich people poor (at least cashflow wise - asset wise you'll be rich by the time you pay it off).
    • franklowe23 on 22/07/2024 - 20:49

      Thanks for your insights. Makes me feel more confident in our numbers (even though I've checked them so many times.).

      It is sad that high house prices make otherwise rich people poor (at least cashflow wise - asset wise you'll be rich by the time you pay it off).

      Couldn't agree more - it's actually really bad for society too as it reduces our ability to spend into the economy which generates jobs and income for others. It's also super sad for those that can't afford housing at all.

  • Eeples on 22/07/2024 - 13:05

    53% might be stressful when your income is $150k as necessities will take a large proportion of what’s left.

    But on $330k after necessities…. It may be enough.

    Have you considered…. Cheaper, 3 bedroom house, the boys or girls can share a bedroom, even out of area ought to mean the kids don’t have to change schools.

    2 million dollar house. Your first house? Okay.

    • franklowe23 on 22/07/2024 - 20:53

      First house - yep, but obviously at 41 & 40 we aren't typical FHB's.

      ACT is very strict around school zones.

  • MarsTitan on 22/07/2024 - 13:17
    +2

    Quite doable. Go for it.

    Interest rates are going to go down in the medium to long term (2~5 years) which will free up 1K a month too..

    • samfisher5986 on 22/07/2024 - 14:12
      +1

      Huge assumption there…

      • franklowe23 on 22/07/2024 - 20:55

        Yeah I'm not sure I'm convinced rates are going down - in fact I wouldn't be surprised if the next move is up.

        There will likely be a blip down at some point in the next 12 - 24 mths, but then I would expect to see them rise again.

          • franklowe23 on 23/07/2024 - 10:00

            @MarsTitan: Yep this is consistent with my medium term view (12-24 mth horizon), rates will go slightly lower.

            Short term (as in Aug-2024) rates may well go higher and again in Oct-2024 if we get another bad inflation number.

            Longer term (36 mths ++) we shouldn't expect to see a macro environment that is consistent with the period 1990-2020 - that is inflation trending now and rates trending down. We should expect to see the exact opposite inflation heating up and rates heading up - there will of course be blips down (in both) on the way as nothing goes up or down in a straight line.

            If this scenario is what happens (and it may well play out radically different) those that can lock in rates for at the next bottom for as long a possible will be well rewarded (like anyone that locked in rates on 10yr fixed terms in 2021 - a few lenders offered these products).

  • apu on 22/07/2024 - 14:22
    +1

    Hey, I'm pretty much in the exact same boat as you. 3 kids under 11 and similar net household income.

    Your costs per month is pretty much spot on for a middle class family. I budget about $7-8k a month for the credit card, which covers basically all of the household expenditure/bills. A few years ago this was like $6k a month, but nowadays as kids get older (eat more, want more), inflation, cost of goods, it's risen by about 20% per month. I think be prepared to trim back things like coffee (I have a BDB and Aldi beans, don't buy take away coffees) and maybe some of the discretionary spend like clothes if you find things get a little tighter.

    • franklowe23 on 22/07/2024 - 20:57

      Thank you - very helpful confirmation of our numbers and ack on the inflation up 20%+ for our actual consumption over the last 24 mths, I've really noticed it.

      Aldi beans are amazing aren't they (sadly can't save there as I've already locked that saving in!!)

    • us3rnam3tak3n on 23/07/2024 - 10:55

      middle class family

      It's strange how many well-off people think they're just middle class

      https://www.abc.net.au/news/2023-05-28/middle-class-family-c…

      • apu on 23/07/2024 - 14:34
        +1

        I was waiting for someone to pick up on my comment. Ultimately I don't care what the ABC consider to be officially middle class. In this context, it's an off the cuff reference.

        • us3rnam3tak3n on 23/07/2024 - 16:12

          Well it's not just subjective opinion - you're just mathematically way off the mark.

  • Desi2021 on 22/07/2024 - 15:18

    how much deposit you planning to put down or just borrowing the whole lot?

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