Potential First Home Buyer, Should I Buy?

Hi all, I posted similarly before and to be honest I'm really wanting to buy a place (so I'm a little bias ) but interested to hear peoples thoughts on the situation.

Basically I'm in a permanent job making about $97k a year in Sydney. I'm single, by myself, no debts except $45K in HECS. I rent right now at about $400 a week, I also pay for all bills (except water) and have been living it up for the past few years. But now want to settle down and jump in on something.

I'm hoping to get something around $400K west of Sydney (past Parramatta basically) potentially something an hour away from the city by train. Initial calculations put it at around $420 a week which is essentially what I pay for rent now (and less then what I used to pay before, assuming 3.20% at 30 years).

Finance wise though per week, I typically pay $400 in rent and save $250 for deposit savings, I also recently got a pay increase so I get another $180 a week, all up I see $830 a week I could put into mortgage/council/strata.

Deposit wise is my problem though, as rent is quite high I find it difficult to get a good amount, but I'll be able to save up $20K plus help from parents of $10K, leaving me with $30K deposit, so that I can jump into the 5% LMI thing.

I've already had an initial talk to a mortgage broker who seemed to say that if I could get $25k deposit I should be good to apply. But I wanted to know other peoples thoughts to as its probably the first time I'm committing to something this big.

Thanks for any of your thoughts.

 

Trustnoone, thanks for your post.

There is a lot we don't know from the post, and it makes it hard to give any specific suggestions. But two things that ring true for Sydney buyers that might be worth keeping in mind: 1) you can't save yourself rich in this monetary policy environment, so you need to invest; and 2) it's hard to get poor by buying real estate in Sydney.

Over to you...

 

Oh, and it is common to kick off your property journey with LMI.

 

You make about 1,500 a week. You save 250. Your finances won't get any better when you have a family.

You have the bare minimum to afford a property. Save harder, you could be in a much better position.

Comes down to how much you are willing to sacrifice.

You buy this, and you run the risk of repairs, higher repayments, body corp, etc. Are you going to feel trapped by mortgage payments? Why do you want to buy?

 

I definitely agree with you, I feel if I'm not really putting my money towards something, or investing it somewhere, then I'm really just living day to day until I can stop, and I won't get any further without investing. haha and true, it is hard to get poor in real estate in Sydney, lets hope I'm not the first!

Thanks for letting me know in regards to the LMI, some people I know think its good, but I had a few people who tell me not to buy until I have like 50% which may mean never if I think about property prices vs my savings over a long period.
Thanks mate!

 

Any of these people own property? Any bought in the last 10 years?

 

haha to be honest probably not, I feel places like propertychat site is super nice in regards to supporting people looking for property. But outside I think some people get a little bitter hearing others are buying property? And so I get told things like "you can't own a property on your own, its not possible" or "you need at least 50% deposit otherwise you're just wasting money". So I think it comes less from facts and possibility that their finances aren't aligned in a way that they can, so there must be a reason why its not possible?

 

Why listen to them at all?

 

Thanks for this! I never thought I'd have a family though its definitely something to keep in mind. I'll be honest, I feel I'm being a bit safe so the numbers are a little off. For example, my initial calculations above is technically based on a place worth $480k, but I'm only buying at $400k. And $250 a week is actually $400 a week deposit, but I knock off a fair amount because I assume if I own there may be emergencies or unforseen repairs. I also save a bit more then this but its more for emergencies.

I agree though, deposit is my big problem, I didn't expect my family to help me, so I was expecting to buy in 12 months time, but now that they're keen, its making me wonder whether to buy in 6 months time instead. My issue is applying for LMI is a competition, so I either only get Janurary or June to apply.

I don't think I'd feel trapped for mortgage payments, I pay $400 a week now on rent, so instead I'd pay $400 a week now for mortgage, that leaves me with $400 [real, not lowered] that I could still add to the mortgage, with the rest of my money spent as usual on bills and the like.

Personally feel like buying because I want my money to go into something to own, instead of renting my whole life. And as mortgage payments are the same (and pre-covid) actually cheaper then renting it seems worth it. I also feel like I'll be investing in some way and that taking an extra say 12 months to build up deposit of $400 a week (with the rest going to rent), could just be me spending $800 a week for mortgage/strata/council.

Thanks for the things to keep in mind by the way!

 

Mostly to have someone playing devils advocate, and they may be right. As I'm new to this theres always the chance that there is a good reason they recommend 50 percent, and maybe I am silly going into debt of hundreds of thousands of dollars. Though to be fair, I know a few people who are millionaires/more and they all tell me I'm crazy not to buy, so maybe it tells me something haha.

 

@Trainee asks a great question. If you wanted to learn how to fly a plane, would you also ask these same people for advice? Or you would you find professional flight instructor? The answer seems so obvious, but for some reason people go to those around them who are usually the least experienced and/or qualified to answer. Do yourself a favour and surround yourself with people who have been there, done it and preferably who are professionals at it.

As a side note, 3.2% sounds actually quite high in this environment. I would assume you're basing it on a 5% deposit but you may find it's a little better than that.

- Andrew

 

What do you mean by the LMI thing, as in pay LMI and buy with 5% deposit or are you talking about the Government Scheme to waive LMI for first home buyers?

You'll be surprised to hear that you could get a rate of < 3% with quite a few lenders, even at that LVR of 95%

Their mindset probably needs adjustment by the sounds of it, if you tell yourself something cannot be done then guaranteed you won't do it and vice versa.

 

Can you elaborate on this? Applying for LMI is a competition? How so?

 

I think his referring to the first home loan deposit scheme.
Cant believe you dont have more saved earning 97k a year, cut back on non essential items and put aside more. e.g. take food from home, dont go out drinking all the time

 

Dont buy.

If you want to settle down then buy with a/your partner.
If you are single then move closer to the city, share with another person, and pay half the rent you are now.

 

Right, well if that's the case, the latest release of 10,000 spots only applies to brand new properties - meaning newly built (never lived in) or construction of a new property.

 

His name suggests he trusts no one and i kind of understand where his coming from.
Im looking to buy prior to risking settling down to avoid any awkwardness when im the only one on the title.
Sharing rent is also a good option.

 

A few things to at least think through about someone talking about property.

Have you made money from property?
Have you ever bought investment property?
Do you think, long term, property will appreciate in the market we're talking about?

If you are telling me not to buy, have you ever thought it was a good idea or good time to buy? Have you ever made money not buying now and buying later? Or lost out on money by not buying? Where / what would be a better buy?

If you are telling me to buy and buy now, have you ever thought it was a bad time to buy? Have you ever made money by buying quickly that you couldn't have if you had waited? Or lost money by buying quickly when you could / should have waited?

 

Very good advice mate, I think thats what I need to do more, find people who have done, or at least doing the same.

Yeah, I think I'm just being super safer, basically I'm underquoting my savings, and overquoting the rate and property price. I guess in my mind I always calculate it so that I have a good safety buffer. But its great to know regarding rate as it gives me a good idea on what to go for. Cheers mate!

 

Thanks so much for this! I know I should feel bad but its kind of a relief, it feels a bit early and I'm still new in thinking about this, so it means I don't have FOMO when January passes by. Hopefully in June I'll have more deposit and the new 10,000 spots available for normal homes *fingers crossed*