Are we ready to purchase our dream home?

Hi Guys,

Firstly want to say thank you to everyone for helping me purchase an IP almost 4 years ago. This is an amazing forum and all comments and thoughts are much appreciated.

- Currently have an IP, we borrowed 100% of the price and than a little more to tidy up, about 490K in total, currently the house is worth no more than 500K (being modest). Rent and Tax return currently covering monthly payments at today's interest rate.

- My primary residence is worth about 350K and owe about 45K to the bank.

- Combined family income is about 95K with two kids (6 and 4 years of age)

QUESTION

- Its about that time when we start thinking about schools. We want to buy a house within a good school zone worth roughly about 700K (including renos).

What do we need to do?

Are we dreaming? Should we just sell both properties and purchase our dream home and live in it? Can we purchase a second IP at 600K and rent it for a number of years than move in and keep the other two properties?

All thoughts and comments are much appreciated. I'm hoping to visit the bank manager soon to see what they think about our grand plan but thought i would post this and get some unbiased thoughts.

Thanks and looking forward to some thoughts.

Joe
 
I'm hoping to visit the bank manager soon to see what they think about our grand plan but thought i would post this and get some unbiased thoughts.

Hi Joe

My response will sound biased because I'm a broker - but by talking with the one banker you're restricting yourself to that one banks policies and servicing calculator.

I haven't crunched the numbers but it looks like your borrowing capacity will be tight.

Cheers

Jamie
 
Thanks for the thoughts guys. Yeh i thought i would be stretching it a little. Might need to look at convincing the wife of a cheaper purchase

First I'd restructure your loans as they look pretty x-colled.

What is x-colled?

Thanks for your interest Rolf.

You ask the tough questions. Im 35 years old and hope to retire around the 55-60 year old mark (but havnt really given that much thought). Jeez after Tax income would have to be along the lines of about 40K a year in today's money. Not sure how that stacks up but im after a modest lifestyle in retirement.

Thanks,
Joe
 
We're are in a similar boat to you. As others have said, go with a good mortgage broker. They'll be able to crunch the numbers and provide answers to "what if scenarios".

i.e. my broker was able to provide me with max loan amounts on different scenarios like "keep the IP and purchase a new PPOR" or "sell the IP and purchase a new PPOR".

Going directly with a bank is bad news IMHO.
 
Thanks for your interest Rolf.

You ask the tough questions. Im 35 years old and hope to retire around the 55-60 year old mark (but havnt really given that much thought). Jeez after Tax income would have to be along the lines of about 40K a year in today's money. Not sure how that stacks up but im after a modest lifestyle in retirement.


40 k in todays dollars for a retiree is in the top5 %. Most would argue that idea is bull. But its true.

If suggest you sit with a decent broker and/or planner that can model what you are looking to achieve,

All good and well to have the dream home to then become a nightmare before retirment.

Im not being a spoiler, far from it, im known as the anti frugal, but you need to work out how such a purchase MAY affect your future outcomes

ta
rolf
 
X-coll means your properties are all securing each other which isn't great particularly if you are looking to make a big purchase.
 
Why do you want to "buy" a dream home ?

You can rent and live in your dream home enjoy the surrounding amenities, good school, cafe, shopping....

The money you save by putting all into one dream home can spread over to couple more positive cash generating properties.

Sometimes, I wonder if buying a dream home is really "living the dream" or better to use same amount of money to put into cashflow generating properties to give you a "dream lifestyle", which one is better ??

I hope this will give you some positive thought about the buying.

there is no right or wrong,,,, just sometimes I wonder what is actually better for people :confused:
 
Some people taking comfort in owning their PPOR rather than renting. I certainly do - I like knowing that I can renovate when/what I like and there's no worrying about leases not being renewed.

It's different for everyone.

Cheers

Jamie
 
I'd personally prefer an okay house with a daily cleaner than a dream house. I have neither though. I've come to accept that I don't treat a house with as much love as it deserves. Maybe when I have more time, I'll show some more respect.

If a dream house is important to you, sell the IPs and go get it. For me it's not that important. I'd just like another shed.
 
We're are in a similar boat to you. As others have said, go with a good mortgage broker. They'll be able to crunch the numbers and provide answers to "what if scenarios".

i.e. my broker was able to provide me with max loan amounts on different scenarios like "keep the IP and purchase a new PPOR" or "sell the IP and purchase a new PPOR".

Going directly with a bank is bad news IMHO.

EXACTLY!........Same boat.
 
I'm with you 'Risky Business'. Some may have misinterpreted my 'Dream Home' to mean big, lavish, expensive and so forth BUT all im after is a 'HOME' that happens to be near some good schools.

In regards to renting i need that security but i respect those that choose to.

Brokers, what is a good broker? Also to ask a dumb question if i may. I'm currently with Qantas Credit Union and happy with them. I acknowledge they may not have the best rates but they have absolute zero fees SO if im not interested in changing banks. In saying that would i still have a use for a broker? Call me stubborn and old fashioned like my parents who stuck with the one bank their entire life.

Joe
 
Why do you want to "buy" a dream home ?

You can rent and live in your dream home enjoy the surrounding amenities, good school, cafe, shopping....

The money you save by putting all into one dream home can spread over to couple more positive cash generating properties.
I agree with this, I've rented almost my entire adult life and plan to do so for the future. I've lived in fantastic locations that I couldn't/wouldn't buy in, meanwhile investing elsewhere with more funds to play with.
 
I'm with you 'Risky Business'. Some may have misinterpreted my 'Dream Home' to mean big, lavish, expensive and so forth BUT all im after is a 'HOME' that happens to be near some good schools.

Not exactly sure what suburbs your are looking at, but, these days, houses near good schools aren't always the big, lavish type. They can be tiny and falling apart but still cost a fortune.
e.g. Balwyn North, Mount Waverly, Glen Waverly, etc...

Renting is one option that we're considering as well.

Don't have the finished product yet, but I've started to create a spreadsheet where you can easily calculate Rent Vs Buy scenarios.

e.g. Rent in Balwyn North and rent out your PPOR
 
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Brokers, what is a good broker? Also to ask a dumb question if i may. I'm currently with Qantas Credit Union and happy with them. I acknowledge they may not have the best rates but they have absolute zero fees SO if im not interested in changing banks. In saying that would i still have a use for a broker? Call me stubborn and old fashioned like my parents who stuck with the one bank their entire life.

Well a good broker has access to many different lenders, not just the 1. Qantas Credit Union is a fine lender, they do have their niches. However, the fact that you are cross collateralised is already a big red flag. Any lender worth their salt - broker or otherwise - just doesn't do this to their clients. This is even before we start talking about rates/fees which are pretty unimportant anyway.
 
Hi Guys,

QUESTION

- Its about that time when we start thinking about schools. We want to buy a house within a good school zone worth roughly about 700K (including renos).

What do we need to do?

Are we dreaming? Should we just sell both properties and purchase our dream home and live in it? Can we purchase a second IP at 600K and rent it for a number of years than move in and keep the other two properties?

All thoughts and comments are much appreciated. I'm hoping to visit the bank manager soon to see what they think about our grand plan but thought i would post this and get some unbiased thoughts.
Joe

How about talking to your accountant first. If you sell IP than perhaps you up for Capital Gains Tax or was there no growth? If you buy just one house you take on extra undeductable debt (after tax money which cannot claim any expenses). Once you see what is most cost effective than talk to the broker since you would know what the strategy would be, right?
Good luck!
 
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