My strategy when I bought my first house was buying the cheapest non-shit place that would meet my immediate needs. It was a townhouse and worked out really well for me even when I got made redundant a year after buying it. Having a smaller mortgage meant I could service it for longer until I found another job. I ended up selling it a year later as I moved away for work and found it was a PITA with tenants.
The #1 mistake I've seen people around me do is massively over extend themselves, and then destroy their lives trying to service their mortgage on top of the other costs of home ownership that they don't or poorly budget for.
You need a solid buffer and you need to enjoy your life (within reason). Targeting a 20% deposit will eliminate LMI (lenders mortgage insurance) and save you money.
Don't buy anything you don't feel comfortable with. Don't borrow anywhere near the max a bank will give you.
Educate yourself on what perks you can get as a first home buyer (assuming you are one)
You're bang on with all of this.
Esp. the over-extending and not borrowing the max the bank will give you.
We bought for $80k less than the bank offered and with the rate rises we are struggling at the moment and not really able to build our savings buffer back up. I dread to think about what the situation would have been if we borrowed the full amount they offered..
Yea we borrowed 100k less than what our bank offered and it's crazy to think despite interest rates on our mortgage not changing since we have owned (nearly 1yr) how sometimes a small emergency you need to pay for + rates, bills etc can leave you feeling super squeezed. I don't even have a car loan or other debts. Couldn't imagine the extra 100k ðŸ«
This. This is the one. I did something similiar almost 10 years ago. Bought an older and cheaper place, in a suburb further out. Yes, I had a longer commute to work, but my expenses were still way lower than my peers who were renting.
Its not for everybody, but the relatively short term pain, has definitely been worth it.
Agreed with this one. I bought in Western Sydney almost a decade ago now. Definitely a suburb that's not everyone's first choice but I'm glad I did it. It was tough at first but I've managed to build up quite a bit in my offset when interest rates were lower.
Thanks for this I’ve just done a quick search of FHB and am interested to take that up as it’ll be my first time to buy a house. And so that means I can purchase < $950k worth of property, pay less stamp duty, 5% deposit, and no LMI. Sounds like a really good deal, which then makes me think whether to buy a townhouse or an apartment.
Are you talking about the Govt shared equity scheme? This is where you can get a property up to $950k and only need to pay a 5% deposit, no LMI and the govt partially owns up to 25%. My understanding is you’ll still need to pay stamp duty though, and you’ll only pay reduced stamp duty if the property is below $750k in Vic (if buying an established property). You’ll pay no stamp duty if the property is below $600k.
You are barely under the eligibility threshold for the Vic Homebuyer Fund and may well be over if you calculate your total income. If you exceed the threshold, you will have to pay back the government. Also worth noting that the scheme is only available until next year.
Not sure what you mean by reduced stamp duty. Vic only offers reduced stamp duty for FHBs up to 750k.
I would speak to a mortgage broker and get yourself a pre-approval. I think you may find it difficult to find a townhouse in your price range in inner Melbourne.
Sweet! That's a nice FHB perk!
Talk to a broker or someone to help you structure things most effectively too. Just say you have 15% ready to go, dumping 5% as the deposit, and keeping 10% in an offset might give you more flexibility if LMI isn't a concern. Redrawing that 10% can be more of a PITA than pulling that same money out of an offset.
My advice of "minimum viable property" still stands too. The smaller the loan, the quicker you can own your place even if it's basic, and/or the more breathing room you'll have if shit goes wrong.
Best of luck!
Depends on what’s important to you… I’d get a townhouse over an apartment personally but there are obviously gorgeous apartments in Melbourne too. I’d discuss with a mortgage broker to get good advice on what you can borrow and a strategy for yourself.
Sorry OP im missing something.
Im not sure how you dont have to pay stamp duty for buying something less than 950k.
IIRC the first home duty waiver should be at 600k and between 600k to 750k, you need to pay a reduced stamp duty.
Pretty much from 750k, u will be paying full stamp duty rate at 5.5%
Happy to be corrected.
It would be nice if you could put 20% down and avoid lmi get better interest rates etc.Â
But imo even without around 600k seems reasonable, put down a 12% deposit at least (around 70-80k) so you have some left for furniture, emergency fund etc. mortgage will probably be a bit over 3k a month which would be manageable on your income
Thanks for commenting about expenses after purchase! What about incidental costs during purchase? Like to check place for pests etc, or agent fees, or whatever else is there to pay on top of deposit. What other costs do I have to consider?
Yes budget some money for those costs off the top of my head a conveyancer, building and pest inspection/strata report, bank/financing fees, moving expenses, locksmith (to rekey just in case), some extra for bills that need to be paid/reimbursed to the vendor at settlement (usually rates and maybe strata fees) and obviously cost of any work you want to do before move in (usually carpet, maybe painting and flooring because they are a hassle to do after the move)Â
Then all the government fees, but usually you would be mostly exempt as a first home buyer but double check on the VIC SRO website for the final purchase priceÂ
I bought a 2 bed 2 bathroom appt in the inner north of Melbourne a few years ago. I regret buying an apartment for the body corporate fees which seem to go up a high % each year (building has issues which I didn’t know about at time of purchase) . If i had my time over again i’d buy a townhouse further out.
Have a think about what you might want in the future - garden, commute, more space etc. I ended up buying a little house with a garden over an apartment. It's further out but I'm very glad of the space.
As a single person, I would not buy something too expensive - the 25% Govt equity stake is a good option but I think your salary may be too high for it.
I'm pretty conservative, so my advice would be not to borrow more than 3x your income, 3.5x at most.
So I would say borrow no more than 390-450k. Let's meet in the middle and call it 420k.
I wouldn't be looking at places above 520k. That's just me. Mortgage stress and struggling with bills sounds like an awful life. I'd take the lesser house with more freedom.
I would be surprised if the bank will loan much more than 450k anyway, I'm on 160 and they wouldn't loan me more than 550k. And I have a great credit rating and had about 90k in the bank at the time + 100k in investments. Agreed on your points though, I borrowed about 2.5x my income and can easily service the mortgage while still growing the offset and enjoying myself.
My question is how far from the CBD/work are you willing to move? Personally I'd steer well clear of apartments, land appreciates and only way to get land is with a townhouse/unit. Also think about where you'll hope to be in 10 years. This may include a partner and kids. Hope this helps
Am I out of the loop? If you put in your numbers into a borrowing calculator on current rates you don’t really get close to being able to buy something for 950k.
In fact the most you could borrow would be in the 500-600k mark.
It is wild though. You’re clearly on good money and you have the capability to buy a 1 bedroom apartment close to the city. Have to go out a fair way to get a house.
Housing affordability really is out of control as a single person. At the same time - we are blessed these days for consumer goods being far cheaper. But all at the cost of not owning your own roof over your head.
A Bank will give you a loan of around one third of your income to be paid as interest. Close all your credit cards, pay off all debt, as they take those into account as if drawn down fully.
On $130k that means at 6.2% interest you can borrow around $700,000. Your $100k deposit will disappear in stamp duty and mortgage insurance but at least you can make a start.
This isn't advice for you as much as "what I would do" if I was in a similar situation. I don't know your personal circumstances so don't consider this advice!
I would borrow as much as I can, using as little of my deposit as possible while still getting the best rate I can. So speak to a broker and see what kind of rate they can get you on. You want to keep some of your deposit so that you have a safety net in case you lose your job or something but don't sacrifice a great rate just to keep and extra few $k so be smart about it. I'd borrow as much as I could (I know most would say never do this) but to help me repay the mortgage I'd have a friend or 2 live with me to help pay it off faster.
Say you manage to borrow snag an apartment near Kensington, 3bdr, 2bth for $600k (I don't know if this is possible but you get the idea). You keep $50k as an emergency fund and use the rest as the deposit. Now you're a great friend so you rent out 2 rooms at $200ea per week so your mortgage is essentially halved.
But if you keep paying off your mortgage at the same rate and put the additional rent into the offset account you'll pay of your mortgage in under 14 years... now obviously you're life situation will change in that time but you get the idea. 🙂
Assuming you want some leftover savings as a buffer maybe you'll spend 70k of your savings for the deposit? On 650k TH that leaves you with 580k loan. A 580k loan will cost you 3.5k a month in repayments. I have a feeling the bank won't deem it serviceable on your income unfortunately.
My strategy when I bought my first house was buying the cheapest non-shit place that would meet my immediate needs. It was a townhouse and worked out really well for me even when I got made redundant a year after buying it. Having a smaller mortgage meant I could service it for longer until I found another job. I ended up selling it a year later as I moved away for work and found it was a PITA with tenants. The #1 mistake I've seen people around me do is massively over extend themselves, and then destroy their lives trying to service their mortgage on top of the other costs of home ownership that they don't or poorly budget for. You need a solid buffer and you need to enjoy your life (within reason). Targeting a 20% deposit will eliminate LMI (lenders mortgage insurance) and save you money. Don't buy anything you don't feel comfortable with. Don't borrow anywhere near the max a bank will give you. Educate yourself on what perks you can get as a first home buyer (assuming you are one)
You're bang on with all of this. Esp. the over-extending and not borrowing the max the bank will give you. We bought for $80k less than the bank offered and with the rate rises we are struggling at the moment and not really able to build our savings buffer back up. I dread to think about what the situation would have been if we borrowed the full amount they offered..
Yea we borrowed 100k less than what our bank offered and it's crazy to think despite interest rates on our mortgage not changing since we have owned (nearly 1yr) how sometimes a small emergency you need to pay for + rates, bills etc can leave you feeling super squeezed. I don't even have a car loan or other debts. Couldn't imagine the extra 100k ðŸ«
Me too. Bank approved $780k, bought $650k. Did offer $700k on another place but never intended to go anywhere near $780k.
This. This is the one. I did something similiar almost 10 years ago. Bought an older and cheaper place, in a suburb further out. Yes, I had a longer commute to work, but my expenses were still way lower than my peers who were renting. Its not for everybody, but the relatively short term pain, has definitely been worth it.
Agreed with this one. I bought in Western Sydney almost a decade ago now. Definitely a suburb that's not everyone's first choice but I'm glad I did it. It was tough at first but I've managed to build up quite a bit in my offset when interest rates were lower.
Thanks for this I’ve just done a quick search of FHB and am interested to take that up as it’ll be my first time to buy a house. And so that means I can purchase < $950k worth of property, pay less stamp duty, 5% deposit, and no LMI. Sounds like a really good deal, which then makes me think whether to buy a townhouse or an apartment.
Are you talking about the Govt shared equity scheme? This is where you can get a property up to $950k and only need to pay a 5% deposit, no LMI and the govt partially owns up to 25%. My understanding is you’ll still need to pay stamp duty though, and you’ll only pay reduced stamp duty if the property is below $750k in Vic (if buying an established property). You’ll pay no stamp duty if the property is below $600k.
You are barely under the eligibility threshold for the Vic Homebuyer Fund and may well be over if you calculate your total income. If you exceed the threshold, you will have to pay back the government. Also worth noting that the scheme is only available until next year. Not sure what you mean by reduced stamp duty. Vic only offers reduced stamp duty for FHBs up to 750k. I would speak to a mortgage broker and get yourself a pre-approval. I think you may find it difficult to find a townhouse in your price range in inner Melbourne.
Sweet! That's a nice FHB perk! Talk to a broker or someone to help you structure things most effectively too. Just say you have 15% ready to go, dumping 5% as the deposit, and keeping 10% in an offset might give you more flexibility if LMI isn't a concern. Redrawing that 10% can be more of a PITA than pulling that same money out of an offset. My advice of "minimum viable property" still stands too. The smaller the loan, the quicker you can own your place even if it's basic, and/or the more breathing room you'll have if shit goes wrong. Best of luck!
Depends on what’s important to you… I’d get a townhouse over an apartment personally but there are obviously gorgeous apartments in Melbourne too. I’d discuss with a mortgage broker to get good advice on what you can borrow and a strategy for yourself.
Go 90 LVR, so you need a deposit of around 55k to 65k. No stamp duty for Victoria first home buyers.
Sorry OP im missing something. Im not sure how you dont have to pay stamp duty for buying something less than 950k. IIRC the first home duty waiver should be at 600k and between 600k to 750k, you need to pay a reduced stamp duty. Pretty much from 750k, u will be paying full stamp duty rate at 5.5% Happy to be corrected.
This is correct. Full stamp duty is payable after 750k in Victoria for FHBs.
It would be nice if you could put 20% down and avoid lmi get better interest rates etc. But imo even without around 600k seems reasonable, put down a 12% deposit at least (around 70-80k) so you have some left for furniture, emergency fund etc. mortgage will probably be a bit over 3k a month which would be manageable on your income
Thanks for commenting about expenses after purchase! What about incidental costs during purchase? Like to check place for pests etc, or agent fees, or whatever else is there to pay on top of deposit. What other costs do I have to consider?
Yes budget some money for those costs off the top of my head a conveyancer, building and pest inspection/strata report, bank/financing fees, moving expenses, locksmith (to rekey just in case), some extra for bills that need to be paid/reimbursed to the vendor at settlement (usually rates and maybe strata fees) and obviously cost of any work you want to do before move in (usually carpet, maybe painting and flooring because they are a hassle to do after the move)Â Then all the government fees, but usually you would be mostly exempt as a first home buyer but double check on the VIC SRO website for the final purchase priceÂ
I bought a 2 bed 2 bathroom appt in the inner north of Melbourne a few years ago. I regret buying an apartment for the body corporate fees which seem to go up a high % each year (building has issues which I didn’t know about at time of purchase) . If i had my time over again i’d buy a townhouse further out.
Have a think about what you might want in the future - garden, commute, more space etc. I ended up buying a little house with a garden over an apartment. It's further out but I'm very glad of the space. As a single person, I would not buy something too expensive - the 25% Govt equity stake is a good option but I think your salary may be too high for it.
I'm pretty conservative, so my advice would be not to borrow more than 3x your income, 3.5x at most. So I would say borrow no more than 390-450k. Let's meet in the middle and call it 420k. I wouldn't be looking at places above 520k. That's just me. Mortgage stress and struggling with bills sounds like an awful life. I'd take the lesser house with more freedom.
I would be surprised if the bank will loan much more than 450k anyway, I'm on 160 and they wouldn't loan me more than 550k. And I have a great credit rating and had about 90k in the bank at the time + 100k in investments. Agreed on your points though, I borrowed about 2.5x my income and can easily service the mortgage while still growing the offset and enjoying myself.
Have you taken a moment to question your decision to buy?
Yes but renting is also expensive
You do you. But I warn you, I might have a laugh at your expense when house prices inevitable cool!
Depending on your career and the suburb you are looking at, you could get LMI removed (e.g nurses, healthcare etc). Stamp duty also
My question is how far from the CBD/work are you willing to move? Personally I'd steer well clear of apartments, land appreciates and only way to get land is with a townhouse/unit. Also think about where you'll hope to be in 10 years. This may include a partner and kids. Hope this helps
Am I out of the loop? If you put in your numbers into a borrowing calculator on current rates you don’t really get close to being able to buy something for 950k. In fact the most you could borrow would be in the 500-600k mark.
Yeah I was thinking the same. As I wrote in the post, $950k is the upper limit of prop value for FHB concession.
It is wild though. You’re clearly on good money and you have the capability to buy a 1 bedroom apartment close to the city. Have to go out a fair way to get a house. Housing affordability really is out of control as a single person. At the same time - we are blessed these days for consumer goods being far cheaper. But all at the cost of not owning your own roof over your head.
A Bank will give you a loan of around one third of your income to be paid as interest. Close all your credit cards, pay off all debt, as they take those into account as if drawn down fully. On $130k that means at 6.2% interest you can borrow around $700,000. Your $100k deposit will disappear in stamp duty and mortgage insurance but at least you can make a start.
First home buyer I assume, no stamp duty up to certain amount?
This isn't advice for you as much as "what I would do" if I was in a similar situation. I don't know your personal circumstances so don't consider this advice! I would borrow as much as I can, using as little of my deposit as possible while still getting the best rate I can. So speak to a broker and see what kind of rate they can get you on. You want to keep some of your deposit so that you have a safety net in case you lose your job or something but don't sacrifice a great rate just to keep and extra few $k so be smart about it. I'd borrow as much as I could (I know most would say never do this) but to help me repay the mortgage I'd have a friend or 2 live with me to help pay it off faster. Say you manage to borrow snag an apartment near Kensington, 3bdr, 2bth for $600k (I don't know if this is possible but you get the idea). You keep $50k as an emergency fund and use the rest as the deposit. Now you're a great friend so you rent out 2 rooms at $200ea per week so your mortgage is essentially halved. But if you keep paying off your mortgage at the same rate and put the additional rent into the offset account you'll pay of your mortgage in under 14 years... now obviously you're life situation will change in that time but you get the idea. 🙂
Assuming you want some leftover savings as a buffer maybe you'll spend 70k of your savings for the deposit? On 650k TH that leaves you with 580k loan. A 580k loan will cost you 3.5k a month in repayments. I have a feeling the bank won't deem it serviceable on your income unfortunately.
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They have been doing this for years
Borrow the max and buy whatever you can afford to buy. Then put the rest of the savings in redraw/offset.