late bloomer FHB

Discussion in 'What to buy' started by chipped, 24th Jun, 2019.

Join Australia's most dynamic and respected property investment community
  1. chipped

    chipped New Member

    Joined:
    23rd Jun, 2019
    Posts:
    1
    Location:
    Melbourne
    Hello everyone, I am a late in life(41 yrs old female) FHB. I came from a low socio-economic background, and for most of my life, the possibility of buying a place did not even cross my mind. All of my family are renters, and for a big chunk of my working life, I had been stuck with dead-end low-paid jobs in the outer suburbs, stuck with abusive boyfriends and friends, poor health and debt. In my late 20s, I got fed up with the daily misery, slowly worked my way out of terrible situations, got some tertiary qualifications, saved and scrimped to be debt-free and finally get some sort of career going. At this point in time, after what feels like a lifetime, I now have $65k in cash savings(all my own genuine savings, no help from family or partner, I have been single for yonks now), $40k in shares(indexed funds), no debts, but also no car(I suffer from seizures and not safe to drive, am very happy with public transport). This year have started a new full-time, permanent job with a $120k year salary, and am saving at a clip of $3k a month(biggest expenses are medical to get treatment for physical and mental health issues and rent of $1800 a month to live close to Melbourne CBD, where current job is, and also where I am getting a lot of recruitment offers from other employers which gives me some feeling of security).

    What prompted me to start thinking about buying a place was a news articles about how women over 55 yrs are at the greatest risk of being homeless. Thinking back on the abusive relationships I've been in, this struck such a huge fear in my heart as I often think of where I would be now if I had not gotten out... I also read somewhere about it being much more difficult to get a mortgage once you turn 45 yrs old. I am sick of renting and would love to have a place to call my own forever! I love Melbourne and being in the inner city, I feel the people I have met here have literally saved my life and sanity, so I am reluctant to move away.

    Initially, I had thought maybe a 1 bedroom flat near the city that I could put a large deposit on would be the right thing to do, but after further reading, it now feels like the worst idea ever. I now also feel reluctant to sell my shares to increase my deposit as they are growing in value and paying dividends.

    Am I running out of time to save a bigger deposit for a $600k 2 bdr townhouse with good access to public transport, like say in Reservoir or Glenroy? Should I put down a lower deposit, say 10%? Would I even get approved for that? I would definitely get a boarder in to help pay the bills.
    I would prefer to live much closer to the city for health reasons, and a low-maintenance 2 bdr apartment in an older block set near busy and well-lit streets appeals a lot to me personally, but I don't know if this would be a terrible mistake as there's so much in the news about apartments being a bad choice. If to get the FHB waiver for stamp duty in VIC means I have to live in a place for 12 months, I would like it to be in a place where I feel safe as a woman on my own who sometimes has to work long hours and get home late. I am in therapy to try to get over the past abuse, and I really hate that I still sometimes feel fear and paranoia for what seems like no reason in a city that has okay crime stats compared to most other places around the world.

    Looking forward to your thoughts on what I should aim to buy given my age and health situation, you all seem like such lovely folk! :)
     
    EN710, KateSydney and thatbum like this.
  2. thatbum

    thatbum Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    5,788
    Location:
    Perth, WA
    My immediate reaction was that you seem to be doing quite well with just saving and shares... so why change the investment strategy when you're already onto a winner?

    What attracts you to property now, over what you've been doing so far?
     
  3. KateSydney

    KateSydney Well-Known Member

    Joined:
    2nd Jan, 2019
    Posts:
    195
    Location:
    Bundanoon
    Hi chipped,
    You seem to be doing well financially now. You're not the only woman who felt shivers down her spine when those reports came out about older women and homelessness - I think we all said a Hail Mary and thought "there but for the grace of God go I".
    I don't have any advice, but may I ask you to clarify something? You said you had thought of a one bedroom flat near the city, but then it looked like the worst idea ever. Is that because you were considering new ones in high rises (which seem to come with their own risks!) Or is it for some other reason? Just would like a clearer picture of what's motivating you, that's all.
     
  4. Peter_Tersteeg

    Peter_Tersteeg Mortgage Broker Business Member

    Joined:
    18th Jun, 2015
    Posts:
    8,130
    Location:
    03 9877 3000
    Once you reach 40 it does become progressively harder to qualify for a mortgage. Lenders now have the expectation that people will work until 70 if necessary. From 40 onwards lenders are either restricted to a shorter than 30 year loan term, or they require a reasonable exit strategy from the loan at retirement age. Fortunately things like superannuation and the sale of other investments are considered reasonable exit strategies.

    At 41 this isn't a big deal, but it does get progressively harder the older people get.

    Also the market appears to be stabilising at the moment. Most industry 'experts' are calling the bottom of the market right now. If this is accurate (and I tend to agree with them), there is unlikely to be a better opportunity to purchase a property in the future.

    At this point with $65k in savings, there's enough for a 10% deposit, plus most of the mortgage insurance and costs for a $600k property. As a first home buyer there's no stamp duty to pay. What shortfall there is can be saved within a couple of months. A salary of $120k is easily enough to qualify for a loan of the needed $540k (as long as there's no other debts) with extra to spare.

    In short, I think it would be fairly easy at this point to purchase a property and qualify for an appropriate loan.

    I agree that a 1 bedroom apartment isn't going to be a good purchase. These are often below 50 square meters which are a challenge to finance as well. There are 2 bedroom apartments within this price point though, in decent locations. There is much better value in established properties than brand new properties.

    I think home ownership is incredibly important. Almost everyone I've met who does well in retirement owns their own home. A little super, some investments and a pension won't go very far if you also have to rent in an increasingly expensive market. It can be enough to live comfortably if you do own your own home though.

    @chipped I very much encourage you to get into the property market as soon as you can. I'm not suggesting you make a hasty decision, but you shouldn't procrastinate either.
     
    craigc and KateSydney like this.
  5. Gockie

    Gockie Life is good ☺️ Premium Member

    Joined:
    18th Jun, 2015
    Posts:
    14,736
    Location:
    Sydney
    @chipped, I liked reading your intro!
    The boarder is a fantastic idea.
    I like your idea of the 2 bedroom townhouse.
    My only thoughts are is there a cheaper place you can buy perhaps in a slightly cheaper suburb? Or perhaps with your budget can you buy a 3 bedroom/2 bath place and consider renting out 2 rooms (if you are comfortable with that idea). Reason for saying this is that even though your income is now very solid and you should have a very good saving capacity, less money borrowed/more income will mean it will take less time to pay it off. Secondly I tend to think a 3 bedroom place is more resellable to people down the track (assuming you are happy to have 2 housemates). But there's no problem if you go with a 2 bedroom place and 1 flatmate if that's in your comfort zone.

    Consider taking out a loan at a higher LVR like 88%... Keep some funds available for yourself just in case you need it.
     
    Last edited: 25th Jun, 2019
    KateSydney likes this.
  6. Marg4000

    Marg4000 Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    6,377
    Location:
    Qld
    Owning your own home outright is a cornerstone to retirement security, so you are on the right track.
    Start by seeing a mortgage broker (some good ones on this forum) to get exact information about how much you can borrow.
    Go for 2 bedrooms, take in a boarder and pay the mortgage down as quickly as possible (or deposit into an offset account oir a similar result). Aim to be mortgage free by the time you retire.
    Marg
     
    Peter_Tersteeg and KateSydney like this.