So An Explanation Of This Debt

March 26, 2010 | Filed under Family & Friends, House, Money

So I suppose I should give some actual information about this elusive apartment and how I bought it, rather than simply going ZOMGYAYAPARTMENTYAYOMGFUCKDEBT!?

Some Basic Details

  1. Two bedroom, two bathroom, security seven-year-old apartment.
  2. Balcony leading off the lounge area.
  3. Open-plan living.
  4. Hidden European laundry in main bathroom.
  5. Located within two minutes walk to a Zone 1 premium train station (this is a good thing!)

I would post photos but the only photos I have have the current owner’s furniture in them. When I show you photos, I want it to really be of my place, with my furniture, and my design. So…photos in coming months.

How I’m Paying For It

With my soul. No, really. What I’m about to tell you now will destroy a lot of readers’ faith and belief in me and my abilities. They will scorn me for going against my principles and for taking a step backwards. I will lose what readership I have left and no longer be thought of a superwoman. I took my parents up on their offer to help me purchase a property. It probably seems strange considering past events, but that was the offer, and I took them up on it.

Why didn’t I wait till I could afford to buy my own place? Because it would never have happened otherwise. The longer I waited, the more I tried to save, the more property prices went up. Property prices will never drop. They may stop rising as steadily as they have over the past five years, but they will never drop. If I waited to buy by myself with no help, I could only ever have bought in the outer outer suburbs, in what is almost rural areas. This isn’t feasible – as a property buyer, you have to think in the long-term. You have to buy where it’s convenient (I have public transport almost on my doorstep), where you have access to good public schools for future children (my apartment is in the McKinnon school zone, which is one of the top four state schools), where property prices won’t stagnate (property prices will never drop in inner Melbourne).

I have my pride. But I’m also pragmatic enough to realise that I shouldn’t turn down a perfectly good offer to own my own home because of personal differences. It was either that, living in the country (not my thing, I’m an urban girl!), or end up renting my whole life and never owning a home of my own.

Money Talk

The apartment cost me $440,000 (plus stamp duty {also known as land taxes}, plus lawyers and conveyancing fees, plus costs of actually furnishing the apartment and moving in).

  1. My savings of $25,000 will cover stamp duty and all other associated fees.
  2. My parents are putting in $100,000 for a deposit.
  3. I have a home loan worth $264,000 (it was all I could qualify for on my salary).
  4. They remortgaged their home to raise the extra $36,000.

I’ll handle my mortgage repayments each month (about $1700 at the current interest rate), paying extra on top of that if I manage to put more away in certain months. I’ll be renting one bedroom with an ensuite bathroom out for extra money, which should net me at the very least $900 a month. Assuming this situation, I could pay off about $2200 each month out of my own income, if I really scrimp and save ($1700 won’t be a problem). At my current rate of pay and assuming the situation stays the same, I can pay off my home loan in eleven years. Technically, I should pay it off earlier as I can only keep climbing up the career ladder, and find myself earning more money over the years.

Once my home loan is paid off, I’ll start paying my parents back. I do not have to pay them back until then. I’ll owe them $100,000 + $36,000 + whatever interest they end up paying on the $36,000. As they always pay off loans really quickly, let’s assume I’ll owe them a round figure of $150,000. They are not charging me interest on the amount they loan me. At that point in my life, I could repay the $150,000 within six to seven years. The emotional debt is another matter.

I will own the apartment in full by the time I’m forty (though as mentioned earlier, probably even earlier). Of course this is assuming I don’t sell the two-bedroom apartment and invest in a three-bedroom house with a partner when it comes time to bring up children. The apartment is liveable for a couple and two children – but if I have the three children I plan on having, I will have to move to a larger place.

What About All The Other Stuff

I settle on the last day of April, so starting May 1st, I will be a proper home owner. There are currently tenants in the property until July the 17th (with a lease I can’t break). I am contemplating asking them to stay for two months beyond that, as my deadline for moving in is the 1st of October (in order to qualify for the First Home Owner’s Grant – $9000 from the government). If they can stay for two months, that’s an extra $3000 in my account, as they’re paying $1500 a month in rent (almost my entire mortgage!).

If they stay, I’ll be in my apartment on October 1st. If they decide to leave when their lease is up, I’ll be in my home on July 18th. Either way, I’ll start looking for a suitable flatmate at the end of June – and I’ll have them on a six month sub lease to begin with, so that if it doesn’t work out (like this!), I have the option of asking them to leave after six months. I’m a neat freak and I admit that willingly – I need someone who’s similarly inclined. I’ve already researched similar house-sharing properties in the area, and I could get $220-$240 per week for the room I’ll be renting out as it has its own ensuite bathroom and is a new(ish) apartment.

I’ve also started scoping out furniture stores to keep an eye on prices and styles. I’ll probably be buying around June in the end of financial year sales (where you get up to 50% off!) and putting furniture in storage until I move in. I’m also not above holding a housewarming party when I move in, and asking people to give me money or giftcards to Target, Kmart, etc. to buy small household items (cutlery, etc.), rather than buying me an actual housewarming gift. I never like what other people buy me anyway, especially as they tend to buy either ornamental clutter, or things I would never use!

In Summary

I’m still very much in shock over the amount of debt I’ve committed myself to. I do also know though, that past experiences have shown that I’m hardworking and dedicated enough to find a solution to any situation – if I want to pay off my mortgage faster, I don’t have any problems with taking seasonal weekend-only jobs (to fit around my weekday 9 to 5 jobs) to earn more money. I’m not above going back to jobs that teenagers do on weekends – I don’t mind babysitting and dog walking.

Combined with the shock however, is incredible excitement. I BOUGHT AN APARTMENT. This kind of high should be bottled and sold at a premium.

12 Responses to So An Explanation Of This Debt

  1. I have to admit, I was slightly confused at first — buying an apartment is a very foreign concept in the midwest U.S., where land is aplenty and people buy houses and rent apartments! I’m very happy for you, though, and I’m glad you’ve thought through this decision so thoroughly. Keep us updated on your life, yeah? I can’t wait to see how you design the interior of the apartment.

    Meg on March 26, 2010 #

  2. So long as you are happy with the decision you’ve made and how you’ve gone about it, stuff everyone else. Everyone is entitled to change their mind, especially when it comes to something as important as owning their own home. I’m not sure if you were being sarcastic or not in your post (I’m terrible with detecting sarcasam, online and offline), but I highly doubt you’ll lose any readers over this.

    Once again, congratulations on getting on the property ladder!

    Tanya on March 26, 2010 #

  3. Here we call them condominiums, but it sounds like the same thing. Congratulations!! I hope it all works out splendidly for you.

    Your mortgage is fixed rate, correct?

    Erin on March 27, 2010 #

  4. Congratulations! It is definitely a good thing and worth the debt, especially because you are responsible about it.

    Mike is looking into buying a house or a condo as well. However, prices here have plummeted because of the economy and Obama has a tax credit for first time home-buyers. As you would never be able to accomplish this without your parents, we would never be able to without the current circumstances. Some of the houses we are looking at sold five years ago for 150-200 thousand dollars, whereas now they are on the market for 60-80 thousand.

    I hope all goes well with finding a flat-mate as well; hopefully you find one that has the same views as you!

    Heather (Skye) on March 27, 2010 #

  5. Wow, congrats. 0.0 It sounds epic. Can’t wait for pics! ^^

    Noellium on March 27, 2010 #

  6. Congratulations again on the apartment! I think it’s awesome you already own your own property and I definitely believe you are more than capable of paying off the debt in a timely manner. I can’t wait to see how you furnish it :D

    Manda on March 28, 2010 #

  7. Congrats again :)

    Wow, that sounds like a very complicated process – but we all know you’re extremely hardworkgin and frugal, so you will be fine! It’s good to see that you have your plans set, and as surprising as it is, it’s really good that your parents are helping you out. I’m just curious as to how that came about?

    Amanda on March 28, 2010 #

  8. Look forward to seeing the apartment! Personally, I don’t think it’s bad that you accepted a loan from The Parental Unit. You’ve done a lot for them; it’s only fair you reap some rewards. Either way, at least you’re in a smart sort of debt, rather than tonnes of credit card debt like other people are!

    Also I just realised I’ve used a Zone 1 ticket to get to your current place. Whoopsy!

    Adam on March 29, 2010 #

  9. HOLY CRAP CONGRATULATIONS! Wow, this is incredible news! I’m actually impressed you decided to do this so soon. What’s the location like? Is it in a good area? Is it in the city or more in the suburbs? I wouldn’t want to buy an apartment unless it were in the city, but prices in the city can be pretty insane, so I can definitely understand suburbs.

    Becky on March 31, 2010 #

  10. You’ve left enough clues that indicate you’ve moved into the same suburb as me. Well done. You’re right; property prices have been consistently rising here since I moved in 4.5 years ago, and if you’re that close to the station you’re also near all the shopping etc; great location. Enjoy!

    Daniel on March 31, 2010 #

  11. Pingback: Jingwen » Blog Archive » I’m A Yuppie, Deal With It

  12. Pingback: Jingwen » Blog Archive » My First World Problem

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