May 27 2009: Buying A House
Filed under Money
I’ve been thinking about buying a house. I know I’ve mentioned the possibility in the past, but the actual chance of going through with it is much higher this time. There are a number of reasons for this:
- If I buy, I’ll be buying before the end of September when the government’s First Home Owner’s Grant is worth $16,000AUD. After this date, it’ll drop to $12,500AUD.
- I currently have approximately $24,000AUD saved up in my account to make an even $40,000AUD deposit.
- You know the $100AUD a week I’ve been paying to my parents since my mid-teens for rent and board? Apparently they’ve been saving that up for me over the years, and that’s going to be their contribution towards my home deposit – approximately another $40,000AUD. It was kind of their version of an enforced saving for the future.
- My parents are also going to act as my guarantors, with our current family home being used as collateral. So, I’ll be eligible to take out a larger loan and buy a nicer place.
I’m looking at various three-bedroom places in the Caulfield area, 12km from the city, which is much closer than where I’m currently living (I want to buy in Zone 1 of our train system, to save on public transport costs). When I end up buying, my family will move with me and live with me in my house – my parents will pay off half my mortgage for me each month (as “rent” for living with me), and our current home will be rented out, with that money going on my mortgage as well. Therefore, while my parents will be paying off the majority of my mortgage (their rent & the rent of our current house will mean that I’ll only need to pay about 30% of the mortgage), the house will be in my name. As my parents have said, this will be my inheritance when they pass away – they’ll pay off most of my house in the inner suburbs, while my brother will inherit our current house in the outer suburbs.
The only question is how large a home loan I’ll be eligible for, as well as how long it’ll take for me to pay it all off. Assuming a loan of $340,000AUD (for a $400,000AUD home) at the current interest rate over 30 years, there’ll be monthly repayments of about $2000AUD. My parents will pay half ($1000AUD), plus the rental price of our current home (another $1000AUD). I’ll throw all my earnings at it each month (approx $2000AUD). Therefore, we should actually have the house paid off in about ten or so years – owning my own home in full by age 32 is a sweet prospect.
At the moment the only thing that’s really holding me back from fully committing to going through with buying a house are my plans to move to the UK. They’ll end up being delayed for a few years while I work my arse off to pay off as much of the mortgage as possible in as short a time (I don’t want to make minimum payments and drag it out, I want to throw all my income at it!). It’s disappointing to have to hold off on something I am keen on, but at the same time, I’m a pragmatist. This is a financial opportunity that I can’t pass up – the benefits far outweigh the negatives. I’ll be going to the bank soon to discuss my options and exactly how much of a loan I’m eligible for…we’ll see what happens. This may come to nothing – I might not be eligible at all!
18 Responses to “Buying A House”
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What’s the housing market like over there at the moment? I think that’s as important a factor as any. I know over here it’s still falling quite dramatically, so buying right now would probably lead to short term losses.
You might want to speak to a mortgage advisor or whatever.
Jem on May 27 2009 #
Good luck with whatever path you take – it does sound like a fantastic opportunity, you’d be nuts not to find out everything you can and very seriously consider it.
Tanya on May 27 2009 #
Good luck buying! You sound like you’ve got everything in place though so luck wont be needed. :D
Woah moving over the other side of the world is a big plan! I don’t think I could be so brave. What is it about the UK that attracts you?
Alice on May 27 2009 #
Sounds like a great plan, but have you looked at prices yet? There’s no way you’ll get a 3 bedroom house in Caulfield for $400K. A flat? Possibly. Prices are still stupidly high.
Daniel on May 27 2009 #
I’m excited for you! It’s a buyer’s market here, so I’d imagine it’d be similar there! I liked the place you showed me yesterday. And… well, seasonally, not a bad time to be looking, since it’s not summer there. Less people sell during the summer here, because of vacations and such.
Aisling on May 27 2009 #
I’m with Aisling – I’m super excited for you! I don’t think I can imagine myself buying a house any time soon, but that’s me and my avoidance of any sort of permanence and commitment :P. Still, I think it’s pretty awesome that your government gives out grants to first time home buyers! Couple that with the savings that you have now, I think it’s a fairly good move to look into getting a house :).
Allee on May 27 2009 #
I know that over here it’s a fabulous time to buy as house prices have dropped tremendously. We got a great deal on our home because of the big economy slump. But I have no idea what the conditions are like over in your part of the world.
That is a very generous setup that your parents have made for you and I definitely think it would be a smart move if you can find an appropriate house. Good luck with all of it!
I’d definitely recommend looking online at different houses available before talking with a realtor though. I know that it helped us because we made a list of exactly what we wanted and knew what we could pay, the realtors job was to find the house that fit the bill. And it will help you to suss out the market to make the best decision.
Also, I found visiting http://www.investopedia.com/ to be very helpful when it came to understanding all the terms of a mortgage and reading articles on all manner of things to look out for when you do decide to buy a home.
But I really think it’s rad that your parents are willing and wanting to help you with it. Their support and knowledge will come in very handy.
Erin on May 28 2009 #
Aw it looks like you got things all planned out… I want to get my first house too but I’m far from that! I’m sooo bad at saving money. =S
Katy on May 28 2009 #
What an awesome time to get a mortgage. With the interest rate so low… I’d love to start buying a house now but it’s not really practical. And by the time I graduate the interest rate would be up sky high again. x_x
Rilla on May 28 2009 #
Wow, amazing! Financial role model right there!
Be careful about throwing all of your money to pay off the mortgage though. My dad sped up the payment by increasing the monthly amount. A year later both my parents lost their jobs and we couldn’t decrease the monthly payment because that would require a bank evaluation (and no family income = foreclosure). So last August my parents sat me down and said that they will not be paying for my $45k Berkeley education. That’s why I’m at a local school now.
We need someone like you Amanda to do our finances lol.
Crystal on May 28 2009 #
Wow you always think things through so wonderfully. I wish I could do it as well as you. I agree we should all hire you to do our finances. Good luck with searching for the perfect house.
Caity on May 28 2009 #
My boy’s father is a financial adviser. He specifies in mortgages. You should talk to him and he’ll advise you on what loan you can get for how much. I’ll email you his details.
Mish on May 28 2009 #
Doode, that is SO AWESOME. Owning a home by 32? Damnnnn. I should probably take a couple pointers from you, I spend money like there’s no tomorrow…. :X
Shen-Shen on May 28 2009 #
I’ll put it out there and say that it’s a stupid idea. You’re going to be stuck living with your parents when you come back to Australia. Your _ASIAN_ parents probably won’t move back to their old place just because you want your new place back to yourself.
You’ll get ahead financially… but is it worth sacrificing your happiness?
Michael on May 28 2009 #
Wow, that all sounds so exciting! And you’re so lucky your parents are willing to do all that for you. Never in a million years would my folks do the same, lol. But like Jem said in the first comment, I’d talk to some sort of advisor about the market and stuff like that first…depending on where you’re buying (and I know nothing about the market in Melbourne, since I live in Brisbane and barely even know what’s going on here!), they might have some advice for you. But still, exciting stuff! Good luck with talking to the bank…hope it all goes well! *fingers crossed* :)
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