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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
- etc



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?
Darkshaunz
Hey Forkeh, just want to say - outstanding thread. I am sure this will help out a lot of future homeowners.

I can't really relate to all this (just yet), do you still remember my current home when you were over here in Malazer? Well my dad put my name on the owner's deed, so technically I already own a home. This home will be paid off fully in a couple of years. When that happens, I told my dad I will rent out the place and move to a smaller home. The proceeds of the rent will go towards my dad's retirement (I want him to travel etc. He loves that) and upkeep of the property.

I'll keep this thread in mind when I do eventually move out from this place. Thanks again for this! :salute:
hekate
We bought our house nearly eight years ago on a no-deposit home loan. So finance was for 100%, meaning we paid an extra .75% interest rate above the standard. All the dollars we had saved went to stamp duty, mortgage insurance and other fees and stuff. We got the first home owners grant, which also went towards stamp duty and other bank-stuff.

We were fortunate that within about two years, values in our area skyrocketed, and we had equity earlier than we thought, so for a few hundred dollars in fees we refinanced at a lower rate and fixed for five years. Prior to that, we'd been paying a few hundred a month extra, then Bain took a voluntary redundancy, so we had some extra thousands to put in there as well. We've got a mortgage offset bank account, so the more money in there, the (slightly) less interest you pay. The fixed period expires in November, so we'll probably go back to variable for a while.

We chose a 25-year loan. Now, eight-ish years later, we're down to a projected term of about eight or nine years remaining, and hoping to pay it off in the next five assuming no babies turn up. (We're also both earning more than we were when we took out the loan.)

The other thing to consider is that if circumstances do change, many banks give the option to pay interest only for a certain period, so say you had a baby, or go down to one income unexpectedly, for a year or two you could drop your repayments to interest only.

I'd advise against mortgaging to the hilt - it sucks not being able to do anything, and you should allow for interest rate rises and having some money to go out now and then, or fix something that explodes. Also, as you mention, you'll have council rates and additional insurance expenses.
Jiminy
I am in a similar boat as well Fork. Nearly time to do the whole settle down and breed thing. I am not sure how comfortable i am with it yet. There is still some things i want to do first (Republic of Kazantip anyone?).

I am currently in the process of doing a bunch of calculations to decide what to do. It turns out that at the rate i am saving while renting i will be able to buy a house outright in 20 years anyway and i think but havn't confirmed that the amount i am spending on rent each year, will roughly equal out to the amount of interest you will pay each year on the loan.

I need to double check all of this, but this it's obviously not a conincidink. The banks know this and it's one of the things that determines interest rates.

Basically, you either give your money to the bank, or you give it to your landlord (who gives it to the bank) and earn a little interest off your saving account from the bank.

How much are you looking at borrowing and how much do you already have saved?
Fork
Cheers for giving some insight into your situation Hekate, seems you were very lucky with that area value increase!

We've got a big decision in front of us:

One area we're looking at has ex-state housing (kicked the blacks out somewhere else) that they've refurbished going cheap at about $300k and has planning to be rezoned in the near future. They're all on big blocks so if the rezoning goes through it could be a bit of a cash cow for investors buying them off you and putting duplexes/triplexes on there. This is more of an investment buy, but it rides on a few things (rezoning, getting out of the 'black slum' stigma) for it to work. If it doesn't we'd just live there or rent it out (as the rental market over he is nuts they'll basically be paying the full mortgage for us) until we have equity to buy somewhere else.

On the other hand we can try to extend the time period of the loan, borrow a bit more and buy a better house in a better area that will be more of a keeper. Comparing the ex-state housing to these better properties is like looking at a dog house vs the White House.

It's going to be a hard decision, but we're going to a bank today after work to see how much we can borrow so hopefully that should make it easier for us to get our head straight. Once we have the approx figure we can seriously look at the suburbs we can afford, see a mortgage broker and shop around for the best loan then get that finance approved.

With the FHOG we've got around $60k for a deposit. Doing some online calculators with our wages it says we can borrow up to $520k odd but that's way too much as Stacey's still studying and only permanent part time with her job. I want more control over it so the lower the amount we borrow, and thus repayments, the easier it'll be for me to cover on my wage alone if something happens and she doesn't get hours.

The current plan is to put down minimum deposit, put the rest in an offset account (essentially making our repayments smaller) so we have monies for furniture, appliances and stuff after the initial buy and a backup in case the car explodes or I split my face open and need plastic surgery.
Spoon
Fork, looks like you put a lot of effort into this. Good job.

I know you've really been looking into this quite extensively so it's good to have it all written down and for people to be able to go through it with you and give you their perspectives. I'm obviously useless in this area, but hopefully others can help.

Hekate, I understood very little of that but it sounded quite useful.
Fork
Yeah, you know me. I plan everything meticulously and want to know all the facts and possible outcomes before I jump into something.

Turns out I did a bit more research and FHOG doesn't include the stamp duty exemption anymore which sucks, they cut that out at the end of last year so we just missed out =/
I'm a retard, it must have been for a different state.

If he says anything handy, I'll report back after our visit to the bank man.
Neifelheim
Fork wrote:

I want more control over it so the lower the amount we borrow, and thus repayments, the easier it'll be for me to cover on my wage alone if something happens and she doesn't get hours.



...or she gets pregnant :lol:

You've done your homework Man, great to see - your laying the groundwork and I think it's only a matter of time before we see a "I bought a house" post.

IMO it is defintely the way to go :thumbright:

When you start paying your loan off - select to pay weekly rather monthly...due to sneaky money stuff, you end up paying an extra month of your house a year, you'll be surprised how much time it takes off your home loan duration.
Fork
Well there's no plans for that for a while :P But yeah.

We went to the bank to talk to a guy, got pre-approved for an amount that lets us look at houses around $400k :O That means that both options are open to us now, the shitty investor-like suburb and the better house in a better suburb.

Next step is to really look into some properties, go to some home opens, see a mortgage broke and see if he can get us a better deal, really look at how much we want to be repaying per week and make some hard decisions.

Shit, I feel old now.
Shrill
I'm playing the 'wait until the market crashes and burns' game.

But then I have no pressing need to buy, and not buying means I can move to Sydney or Singapore or wherever my job shifts me.
Wiing
I am in the process of saving up my deposit, I am looking at getting a shit house in a rich area.

As for paying it off, going to put it in an offset account and pay it off in about 5 years.

Going to be a tight 5 years, and but once that's over I can focus on my career and travel etc.

Yea willy, the weekly or fortnightly repayments are the way to go and can cut years off of a long lone.

Thanks for the thread fork, I never thought of seeing the local council.
Bain
Shrill wrote:
I'm playing the 'wait until the market crashes and burns' game.

But then I have no pressing need to buy, and not buying means I can move to Sydney or Singapore or wherever my job shifts me.

Doubt our housing market will ever crash.

Also - buying a house doesnt mean youre locked to it. You can always sell it or have renters move in.
Neifelheim
Bain wrote:
Shrill wrote:
I'm playing the 'wait until the market crashes and burns' game.

But then I have no pressing need to buy, and not buying means I can move to Sydney or Singapore or wherever my job shifts me.

Doubt our housing market will ever crash.

Also - buying a house doesnt mean youre locked to it. You can always sell it or have renters move in.


Exactly, trying to time the market is a mugs game. Bain is spot on when he says you can always sell it or rent it out, our crazy financial rules mean it is actually better in many ways to buy a house, rent it out to claim things like depreciation/deductions etc and rent someone else's house off them and live in it!

I worked that one out one night while driving an underground hauler in Kalgoorlie about 4 years ago, it was like an epiphany...I rechecked and rechecked my sums on a scrappy bit of paper. Its crazy.

Our market will most likely not crash as our economic circumstances are totally different to what precipitated the crash in other western countries . e.g. America
Which had -

- An oversupply of housing.
- Loans to basically anyone that wanted one.
- An economy about to hit the slippery slopes.
- Financial Institution was rotten at its core (well think all those banks that needed bailing out etc.

We don't have that in NSW we have -

- Undersupply of housing , and there is still not enough houses being built to meet growth.
- Very low vacancy rate in the rental market.
- Robost economy (even if it is a 'dual 2-speed economy at times)
- Various income and credit checks required to get a home loan.

I bought my first house in 2006, about 6 months after the end of the property boom that had gone nuts through most of urban Australia for the past 3 - 4 years prior. Sure it sucked that I missed out on that, but it was the earliest I could get into the market.

Now 5 years on, I have been able to buy a much nicer/larger 2nd house (worth double our 1st little showbox house) and move into it and rent the small 3 BR out. The rental is now at the point where the mortgage = Rent recieved and the other expenses are tax-deductible.

Which is fucking sweet because I am now looking at house no3. I know it sounds like I'm bragging or whatever, I'm not trying to, I've worked hard and done research over the years to guide my financial future in a good direction. Neither my wife or I had any financial help from parents or anything so we pretty much did it all ourselves (except for the original $7k grant from the gov't which was great!)

So assume I get house 3, I might buy one worth $300k and the repayments will be something like $1500 a month. Rent for a place like that is prolly going to be around $400 in the area I live for a large 3 BR. Which means I only have to cover the difference of $300 a month - and if your working full time and with a decent job it is doable (we did it with the other already) until you get the property to a level where the mortgage = rent received. Then you are laughing and you either sit back and pay the rest off...or save another $50 - 60 k and buy another.

I recommend going to a bookstore for those not so good with $ and buying a money book (jewgolds) by Paul Clitheroe or Noel Morgan (I think?) and reading it cover to cover then over again.

Also about tax-deductions on a rental, all expenses for a rental are tax-deductible, including interest on the loan,…..and considering the amount of interest you pay, that alone is a staggering amount to get deducted off your taxable income.
Neifelheim
Also if anyone is wanting to talk to a financial advisor/mortgage broker I recommend talking too this guy - Robert Cribb. http://dare2compare.com.au/

He is based in Mid North NSW.

I first dealt with Robert in 2006 he worked for a mortgage broker franchise and had won many of their "best broker of the month etc'. He was able to get us a deal at a time when I didn't have a great job/income and was helpful and proffessional at all times.

We had tried the banks to no avail before this. The 2nd time around he had moved on into his own company (dare2compare) and all our transactions were via phone/email or fax we never met face to face (as he had moved out of the area) and he was able to secure us another 'good deal'.

I cannot recommend this guy enough if you are looking for a broker :) Even if your interstate or a long distance away give him a call :) I don't normally endorse people but this guy went above and beyond the level of service I expected.
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