Starting out

[talby]

Hi,

I'm a first time poster. I'm 35 and have never owned property. I'm sick of renting but only have 15k in savings. Can anybody suggest a way of getting into my first place? I'm single and would prefer to live closer than further out of Melbourne but obviously cant be picky, maybe looking at footscray. I earn 70k per year, does anybody have any suggestions?

Any help is appreciated.

Cheers,

Talby

 

[itsjustme]

Hi Talby,

I am also new here and others will have much better advice than me. I just wanted to make a couple of quick points.
First, buying in Footscray shouldn't be considered having to settle. I would be ecstatic if I could afford to buy there. And with your $15,000 deposit, are you sure you can even afford this?
Second, there may be very good reasons why you have only $15,000 in savings. But that's not a lot. Others, as I say, are seasoned investors and I am new. But personally, building the deposit is where I would begin. Happy to be corrected on this.

 

[talby]

Thanks itsjustme, as soon as I sent that initial post and re-read it I thought it sounds like I'm bagging footscray lol, I really didnt mean for it to sound that way, I think it's a great location.
I've only saved 15 because I've always had low paying jobs but have put a little away at a time, since getting an extra 20k per year I've managed to save a fair bit more.

I'm certain I could afford the repayments on a flat in footscray.

 

[Ace in the Hole]

Sick of renting.
Want to get into your first place.
Have 15k savings.
Considering Footscray.
Can anybody suggest a way of getting into my first place?

Yes, just find a good mortgage broker to see how much you can borrow.
Use the First Home Owners Grant.
Then simply go and buy a place within your budget.

Looks like there's quite a few places around the 150k mark there.
Although, they look very small so need to check if you can get finance for those.
Otherwise, just save up more deposit as fast as you can in the next 12 months so you can get a slightly bigger place.

 

[Peter Parker]

Looks like there's quite a few places around the 150k mark there.

Just be careful that at that price they're not student apartments - apart from the finance difficulties mentioned they may not allow owner occupiers.

You should be able to pick up a small unit in Sunshine/Albion for under $200k which would allow either owner occupation or tenancy. They're still small but would still be bigger than student apartments and finance shouldn't be a problem.

Eg http://www.domain.com.au/Property/For-Sale/Apartment/VIC/Sunshine/?adid=2008485347

The area doesn't have the best reputation but it's close to everything and you'd have no difficulties getting a tenant when you want to upgrade.

A comparable unit in Footscray will be dearer. $70k pa would be enough to pay the mortgage but you may need to wait longer to get the deposit for a more expensive place.

 

[Ace in the Hole]

Yes, looking more closely those 150k apartments all look like student studios.

 

[talby]

Thanks everybody.
I could get my deposit up to 20K in the next two months. So I will have a chat to a good mortgage broker and see what he can do. The only problem is aside from my minimal savings and my job I don't really have much else

Maybe I'll just keep saving for another year.

 

[jaycee]

A good mortage broker may be able to help you determine if you need to do that and how much you could borrow as a result of saving more etc as well....

 

[Jamie M]

If you're willing to purchase something around the $200k mark you might be able to purchase something now.

You'd need to take out a 95% loan with LMI added on top.

You save $15k savings and will be elligible for $7k via the FHOG. That's $22k in total.

For the 95% loan, you'd need a $10k deposit and you'd use the remaining $12k towards stamp duty, legal fees, etc.

Cheers,

Jamie

 

[recruit2]

The market in Melbourne in particular isn't going anywhere in the next year, if anything it will pull back a tad. If I were you, I would:
- Continue saving more for the next year while the market cools of;
- Enough to get you across the line to not require mortgage insurance.
- Then go for it.
- Buy something really crappy that you can fix up or tidy up a little bit in your spare time, so that you can try to also create some reasonably quick equity.

If you race in now with your small-ish deposit just to "buy a place because you must do so", you will pay a penalty for requiring mortgage insurance and it won't really be worth it as the places aren't going to jump up in value in the next 12 months. So get yourself into a better initial position and then go in 12 months later. You want to always avoid mortgage insurance if you can help it.

 

[Jamie M]

Mortgage insurance doesn't need to be looked at as a bad thing. Fair enough, it's annoying having to pay for an insurance that covers the lender. However, without it, most of us would have to save 20% deposits to purchase anything.

In Canberra at present, it's difficult to purchase a basic 3 bedroom home for less than $400k. If I was a FHB trying to avoid mortgage insurance, I'd need to bring about $100k to the deal ($80k deposit and $20k for SD, legals, etc).

This is likely to take years to save and during this time, property prices will more than likely continued to increase - meaning I'd now need to save more than $100k.

However, if I opted to pay for mortgage insurance (which can usually be added to the loan so I don't need to fork out my own cash) I could get away with putting in as little as $40k into the deal ($20k deposit and $20k for SD, legals, etc). Yes, I'd be paying about $10k mortgage insurance (which would be added to the loan) but I'd assume that the capital growth the property achieves over the coming years will justify this expense.

Cheers,

Jamie

 

[talby]

The market in Melbourne in particular isn't going anywhere in the next year, if anything it will pull back a tad. If I were you, I would:
- Continue saving more for the next year while the market cools of;
- Enough to get you across the line to not require mortgage insurance.
- Then go for it.
- Buy something really crappy that you can fix up or tidy up a little bit in your spare time, so that you can try to also create some reasonably quick equity.

If you race in now with your small-ish deposit just to "buy a place because you must do so", you will pay a penalty for requiring mortgage insurance and it won't really be worth it as the places aren't going to jump up in value in the next 12 months. So get yourself into a better initial position and then go in 12 months later. You want to always avoid mortgage insurance if you can help it.

Recruit2 thanks for your response, it makes a lot of sense. I can hold off until this time next year and hopefully have 35K behind me. As it's my first property I would like to live in it for the first 12 months and do a few improvements to it if needed so something a little larger than a shoebox would be really good.

Thanks for your help Mortza I agree with you regarding the mortgae insurance, in a booming market it is the only passage of entry for a lot of buyers unless they are high earners or have their parents help.

 

[IFBB]

As mentioned above, id try wait it out for another 9-12 months, and continue to save up your deposit.

If you say you can save an extra $5000 in 2 months, hopefully in 12 months you could push that towards $40 - 45K in savings with the money you already have.

 

[ourhouse]

Mortgage insurance doesn't need to be looked at as a bad thing. Fair enough, it's annoying having to pay for an insurance that covers the lender. However, without it, most of us would have to save 20% deposits to purchase anything.

In Canberra at present, it's difficult to purchase a basic 3 bedroom home for less than $400k. If I was a FHB trying to avoid mortgage insurance, I'd need to bring about $100k to the deal ($80k deposit and $20k for SD, legals, etc).

This is likely to take years to save and during this time, property prices will more than likely continued to increase - meaning I'd now need to save more than $100k.

However, if I opted to pay for mortgage insurance (which can usually be added to the loan so I don't need to fork out my own cash) I could get away with putting in as little as $40k into the deal ($20k deposit and $20k for SD, legals, etc). Yes, I'd be paying about $10k mortgage insurance (which would be added to the loan) but I'd assume that the capital growth the property achieves over the coming years will justify this expense.

Cheers,

Jamie

Thanks Jamie. That is great explanation in favour of LMI.
Another aspect of LMI is you can buy a big dream house with it for which you can't imagine to save 30% upfront (20% deposit+5% Stampduty+5% money for your holidays). LMI is certainly a saviour for many.

 

[ourhouse]

I don't think Melbourne property prices are going to decrease any sooner. Atleast not in next 1 year, because as per today's news more and more jobs are being created. More jobs = More home buyers and increase in property price.

Waiting for another year may make your dream property expensive by 5-10%.

 

[chilliblue]

I would do exactly what you are doing now.

Take a look at your situation and understand what you can and cannot afford.

Do your research at the type of property you want, in the areas that you are interested in and of the price you are comfortable to afford.

While waiting for that property to pop up, live off the amount you would ultimately live off if you did indeed buy with an extra 10%taken off as a buffer.

Remember to budget for all expenses such as insurance, strata fees, travel costs to and from work, etc.

To many people rush in with an understanding and they are the ones that end up doing badly.

Well done with being smart enough to ask the right questions and best of luck with your purchase.