How much to spend on First PPOR Rant!

Hello PC,

I initially wrote this post as a question but thought I'd turn it into a rant. We're currently looking to buy our first PPOR and finding it hard to set a firm budget on how much to spend. We've created spreadsheet models for affordability with various scenarios including increased interest rates and reducing one income to a quarter or a half. We landed on a figure that we could afford and what seemed reasonable to spend. The thing is, despite all this planning around affordability, the final number we've landed on is fairly random. We worked out what we could afford and then worked out what sounded reasonable to us. For example - these are purely hypothetical numbers - $770k seems palatable but then when we think of $800k it just seems like an absurd amount to spend. This is for a PPOR that we are hoping to live in for many years, in our ideal area and add to over time.

Certainly, where we are looking, 30-50k seems to be the difference of "can buy a house" vs "can hopefully buy a townhouse or house on a main road". Not sure if a lot of home buyers have a similar threshold to us so could be a supply and demand thing? I am unsure. Anyway, I never had this problem when buying an IP as while I had affordability models it really came down to finding the right property then ensuring numbers added up and it was very easy to be confident making offers and knowing how much I could spend on a particular property.

How do we figure out how much to spend without over extending given this is an emotional decision?

Summary: Psychological factors of working out how much to spend on our first PPOR are weighing on us.

 

Have you approached a lender or broker about how much their calculators say that they will lend to you?

 

Yes we have a trusted broker and found out how much we can borrow through a big 4 bank. We can borrow more than what we need to buy a nice place in our preferred area. One of the perks of Brisbane. This is great but also means it comes down to us to work out how much to spend.

 

Thanks for the input & good point about having a backup plan!

 

You’re probably right! Although we are actively looking, just reassessing everything as we hit the ground on our search.

 

Stress less @db9 !

You're NOT buying an investment here. A PPOR is a completely different thing.

Work out how much you're willing to spend per week, allowing for higher rates and then buy something you can afford comfortably and enjoy it!

As long as you don't overspend, the "value" of a PPOR is that it's yours. The security that comes with that is priceless.

 

Ok, here is a real life case from 1979:

PPOR (second PPOR after selling first home)
Budget $45K-$48K.
Absolute maximum $50K
Purchased for $49,500

You can all laugh now.
But my point is that our maximum was about 10% above our desired spend.

So quibbling between $770K and $800K seems odd.

Stretch yourself (realistically) to buy a home you feel you will be happy living in for many years. Consider present and future living needs.

Maybe, like us, you will be in the same home after 40+ years!

 

Really appreciate your thoughts @hammer and what a story @Marg4000 . Certainly gives some perspective on things. @The Y-man not too bad at all! @Rolf Latham We have looked into debt recycling but will need to get specific advice for us on this. Have an IP but very limited appetite for other investments so not sure how much of an impact this will make for us. (Will need to get specific advice because I really am out of my depth talking about debt recycling!)

 

For me, my gut has always told me my answer. Every time, if I can't sleep well for the next two nights and felt uneasy in my stomach, I've decided not to go ahead with it. As for assessing your situation, what is the worst case scenario?

But 30k seems like nothing over the long haul when you gotta deal with it every day!

30k over 10 years is about 60 bucks a week. Surely you can find a way to save 60 dollars a week on top of the lifestyle you're living???

 

When buying property you will always not have enough money to buy the property you want to buy. Affordability based on your own income and savings and what you can borrow and be comfortable with will limit your purchase. Like every other buyer.

So the generally accepted view is to determine the maximum and then look for what fills that need.

 

Just revisiting this thread as it's been about a year! Thanks everyone for your input, it was all very valuable. It's crazy to think what a different headspace we were in a year ago and how different the world/market was. We ended up just deciding what type of house & location we wanted and went for it! It took a bit of time, an excellent buyers advocate & blocking out the overwhelmingly negative sentiment at the time.

Well that's all but a distant memory now and I'm feeling really lucky ending up with our home, and who knows maybe like @Marg4000 we'll live here for 40 + years!

Thank you everyone for the positive contribution to our journey!!