Buying PPOR

[AndrewT]

Looking for opinions.

Was not sure which section I should post this in so thought I would try here. For a while now my partner and I have been looking for a PPOR, we recently sold off our last place and used the profits to clear up all our debts and now have a deposit of to 110k, with another 200k equity in a IP.

We have found a house that is perfect for us. Great size block, good quality renovation, just suits us to a tea. Our only issue is we will be looking at a loan in the mid 500 bracket (using 110k deposit). Currently I earn from around 80-90k a year and the partner 60k. Initially we thought a mortgage of around 450k is suitable but an extra 100k is needed. Now the question is, do you spend that extra and sacrifice a little more to have, what I see as, a home we have always wanted to live in?

At the current time, the interest is basically what we pay in rent. At 7% rates it is roughly an extra 160pw extra.

So opinions please. Take a bite and have a go or settle for cheaper place and upgrade again down the track?

 

[The Y-man]

At the current time, the interest is basically what we pay in rent. At 7% rates it is roughly an extra 160pw extra.

Why 7%?

The Y-man

 

[The Y-man]

Now the question is, do you spend that extra and sacrifice a little more to have, what I see as, a home we have always wanted to live in?

What we found is that buying an awesome resort like PPOR means you don't need to spend money on holidays, becasue anywhere you go is a bit of a let down compared to home

The Y-man

 

[vbplease]

Why 7%?

The Y-man

Long term rate over the next 15-20 years?

The obvious q's come to mind - how good are you at budgeting, compromising with spending, will it strain the relationship, future plans e.g. Kids

I don't like the idea of 'upgrading' as it's a big cost in itself.. Selling moving and buying costs could rack up to $50-100k. Wasted money.

 

[AndrewT]

I calculated 7% just because i thought adding 2% on the rates is a good way to figure out if the mortgage would break us financially. We are people who love spending time at home with family opposed to holidays away. To myself it seems like something I am willing to tackle. It's got character, unlike the new homes nearby selling for same price, 400sqm smaller and no uniqueness.

 

[AndrewT]

Long term rate over the next 15-20 years?

The obvious q's come to mind - how good are you at budgeting, compromising with spending, will it strain the relationship, future plans e.g. Kids

I don't like the idea of 'upgrading' as it's a big cost in itself.. Selling moving and buying costs could rack up to $50-100k. Wasted money.

Exactly the reason we are looking to buy one good quality home we love, staying put and knocking the loan on it's head. In the short term, a 3 year fixed rate would provide some certainty of repayments. In my line of work, 3 year should see me over the 100k mark but I don't want to be basing my decisions off should, coulds or maybes!

 

[Scott No Mates]

Andrew I will flag a few things:

* the equity that you intend to redraw from your current ip may not be able to be claimed as a deduction (unless it's in the offset account).
* budgeting with a 2% buffer is a great method provided that you put the additional amount into your offset account, this will become a buffer later on if you have kids/time out of the workforce.
* moving costs money, stretch yourself.

 

[Rolf Latham]

i dont believe anybody can provide relevant decision commentary, because their risk profile isnt yours.

Much good stuff has been said already.

Make sure you have decent income protection in all of that, and consider having a debt recycling strategy in place so as to convert bad to good debt, and thus have the place paid off a little earlier.

Dont fix ALL the debt if you are going fixed, leave a portion variable that you can hoe into.

A good broker/ banker and a good financial planner can help you with much of the above, but in the end, its your puppy

ta
rolf

 

[Bunlee]

Hi Andrew

Life is short so, on the surface without knowing all your individual circumstances, I lean towards going the extra stretch & having the place that you know you want to stay in for a long time.

It has happened to me earlier in that I bought a place to live in as a stepping stone and always felt that way, I wish I stretched a bit then.

As has been stated earlier, moving, selling and further buying costs down the track may be significant and perhaps more than the extra stretch now to get the place you want.

Depends on your personality but for me it is great to live in the place you love, life settles down and provides a known frame from which you can view future investments.

Get stuck into the mortgage and enjoy life in your long term residence is my view.

All the best