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There comes a time when you decide you've got to grit your teeth, dig your nails in and make a near-life-long commitment and buy a property. Both my girlfriend and myself have both recently been bitten by the house buying bug, it looks like this time is nearing for us.
I thought i'd put down my thoughts on the subject, what I've learnt (so far) and open the floor to everyone to put their own 2c in.
Disclaimer: I'm still quite new to this and not very knowledgable in the field, this information might be incorrect, don't make any life changing decisions based on this thread or anything I say, ever.
Renting Is Dead Money
This is what any home owner will tell you, but it seems that it's mostly to justify their own purchase.
The idea behind it is that instead of paying $300 for rent that is essentially paying off someone else's mortgage, you buy a house and then the weekly mortgage repayments you pay is paying off your own property. Then in 10/20/30 years you will have paid it off fully instead of owning nothing and still be renting.
The logic is sound, but it's not quite as simple as that. First of all renting and owning is a different lifestyle, when renting the ability to pick up and go (even if you have to break lease) is freedom! By planting your stake and buying a place, you're going to be there for a while - the average lifespan of an owner staying in their property is 8 years or some shit.
On top of that it costs a lot more and just isn't feasible for everyone, you first of all need to be able to save enough capital to break into the market (deposit for the loan) then be able to spend more money on the house than you currently are for renting.
Renting will also generally allow you to live in a better area and in a better house than the equivalent house/area you will be able to purchase.
Money, Money, Money
In terms of extra expenses with owning over renting you have:
- Land rates
- Council rates
- Water rates
- Mortgage insurance (mandatory with some loans)
- Life insurance (optional, eg if one of you die the house is paid off for the other)
- House and contents insurance (optional of course, but you're dumb if you don't get at least house)
All of this costs you about $60 per week on top of the mortgage to keep this covered.
In Australia we're lucky enough to have the First Home Owners Grant in Australia which gives you:
- A once off $7k towards your new home (it used to be $14k but they slashed it, cunts)
- Or $14k towards the first house you're building
- As well as being exempt of Stamp Duty (approx $15k for a $400k house)
There are a few requirements to be able to claim this, namely:
- Be an Australian Citizen and 18+ years old
- Not currently have a house in your name
- You must live in the house within 12 months of purchase, for at least 6 months (this is to stop people using it as an investment)
Then you need to consider things that you want that the property you just bought doesn't have, eg:
- Air conditioning / Heating
- Extra power points
- Gas bayonets
- Shade out the back for bbq's
- Carport to save your car from the sun
Things To Consider
Property and Area - Do you want a good house in a shit area, or a shit house in a good area?
Investment or Long Haul - Are you going to stay in it for a while, or the minimum and rent it out? Depending on what you choose you might want more rooms for babies, different style of back yard and so on.
Neighbours - You're probably going to have to live next to them for ages, I hope they don't have loud screamy sex, massive parties every week, have barking dogs, smell like shit or perve on you through your bathroom windows.
Do you want to Live Alone? - If a mate/relative wants to move in they can pay you rent under the table, then that's going towards your mortgage and taking stress off you.
Financial Risk - Should you borrow the maximum you can and struggle with repayments? Or prepare for if you pop a baby out or if one of you gets fired?
Do you Research or see a Mortgage Broker - They will give you advice and compare all the home loans and tell you the best one for you. They're free and get a kickback from the bank you go with and will help you cut through the red tape. However don't take their word as gospel and make your own decision in the end.
Many more of course, this is all I can think of right now.
Actually Buying It
There's a whole bunch of tips and shit to try make the decision easier.
First and foremost:
- Don't pay more than you can!
- Don't fall in love with a house!
- Don't be upset if you don't get the house you want!
Get your finance approved (loan approved by a bank) as that way the real estate agent will take you seriously (especially if you're younger) and treat you better.
Real Estate Agents are cunts and will lie to you black and blue, anything to get a sale and their bountiful commission.
Offer conditions are what you say need to be done for your offer to mean anything. Be precise with these so you don't get screwed over. For example:
We offer $350,000 on the following conditions:
- Subject to finance (so they can't accept it, then if your finance falls through you're fucked and they can choose a loan for you)
- Hard wired smoke alarms (required by law)
- White ant inspection (also required by law)
- and so on
Get someone else to walk through it, or a few more people. These people should have bought houses before and know the traps you can fall into. They can look for water damage, test all the lights, make sure it's structurally sound and so on.
Then go to the local shire, tell them the address and get them to check for:
- If there's any caveats on the property
- If there's any easements on the property (eg a gas main, so they can't come in one day and rip up your garden to get to it)
- If there's any plans for a freeway or some shit to run through it in 5 years
This is all just to make sure you're not getting yourself screwed over by buying a lemon.
Once You Have Bought It
Congratulations! But now you've got to pay it off.. how? From asking a bunch of people people, there are two main ways of thinking:
Option One: Go flat out!
While you're young, have two full wages and no babies, you should put as much money on it as you can. Every extra cent, be a stinghy cunt and not go out on the town but stay at home and drink wine out of bags.
This makes sense, you get equity quicker and can move on with your life quicker. However this route makes your social life and living standard suffer to a degree, which is a large concern of first home buyers.
Option Two: Time is your friend!
Get the loan for the longest amount of years (40 instead of 30 if you're younger), put the minimum deposit down, the rest of your deposit in an offset account, pay the minimum repayments and wait.
The logic of this method is that over time your wages go up and the property value goes up due to inflation, and after a while both of those make the repayments irrelevant as you have enough equity to buy your second house already.
Personally, I'm leaning more towards the second option as my woman is still studying and I want to be able to afford it on my wage alone if something happens. I like the idea of it taking care of itself too, looking at previous sale prices 5-10 years ago, they are a joke!
A Final Word
I've tried to make this as unbiased and as informative as possible, but I've no doubt missed things.
At the end of the day buying a property isn't treading water, it's gambling on an investment. An investment that will pay off in the long run based on a huge number of variables that are out of your control like variable interest rates, natural disasters, your area turning to a slum, domestics/divorce, market crashes and meteorites.
The way I see it is, you are taking a gamble on yourself. If you believe you can make those repayments and have put yourself in the right position by doing the right research and making the right choices, why not go for it.
Appendix I - More House-spotting Tips & Good Questions
Things to look for:
- Which side of the house is facing north, as that side will get a lot of sun (good in winter, bad in summer)
- Look for dry rot in wood, mould on walls (especially near air con drip pipe things and gutters)
- How many power points are in each room and if they have built in robes
- Where the phone line is (for your router)
- Where you'll put your tele in the lounge room
- Security lights (and where motion sensors are)
- Security fittings on windows
- Fly screens on doors for summer
- Which rooms are airconditioned
- If your fridge/dishwasher/washing machine will fit in the recesses
- Knock on the walls to check they're real, if it's all apparently double brick ask why that one sounds hollow
Some good questions to ask:
- If it's on the mains or bore for water (potential for stains and shit if on bore)
- If it's on the sewerage mains or has a septic tank (mains has higher rates, but you don't need a truck to come empty it)
- If the reticulation works
- How old the hot water system is (if it's >10 years it could blow) and if it's gas/electric (electric costs more)
- How old the air conditioner is
- If the extensions are council approved (can be fined if not)
- If the shed in the back yard will be staying
- If the house has insulation (if not, you should get them to save on power bills)
So I ask you..
- Have you ever bought a property?
- If so, which 'pay off option plan' did you use, or make your own?
- Got any tips or anything to add anywhere?
- Anything to correct with what I said above?
- Ever used a mortgage broker?