When to buy going to one income?

[NicW]

G'day.

This is my first post to the forum, however have spent some hours on it.

My wife and I are expecting our first in October and will be going to one income at the time. We expect this to be for 12 months or longer. We have about $10k left on the PPOR, however are looking at borrowing for a new car (family requires it!) from the home loan redraw, so lets say that in October we will owe about $40k non taxable on a single income.

Do I buy whilst we have two incomes (higher borrowing potential), or wait for the right opportunity and accept less borrowing power? I also want to keep the loan open with some dept, to have high cash flow availability.

thanks,

Nic.

 

[Punchy]

Firstly Congrat's on the good news.

For what it's worth I'd hold off until your bundle of joy arrives. Borrowing what you can afford on two wages, when you intend on dropping back a gear to one wage would be a tad risky.

Before bub - 2 wages - less risk as if one of you lost your job you still had one wage to back you up

After Bub - 1 wage - three mouths to feed.

I think that you may find that Bub will be a little dearer than you think. I'd be saving like crazy right now whilst you are on two wages. Then see where things stand October next year. Now is the time to start being conservative IMO. Have you thought about personal income protection insurance for yourself? Or life insurance?

Then again I am quiet conservative when there is a child involved.

 

[NicW]

Punchy - thanks.

Insurance - I do have life insurance, however not income insurance. I believe I could pick up other employment easily enough, although maybe not with the same $ or conditions. If all else failed, I could become the home parent! I have found in the past that income protection benefits are not that good for the cost.

We have always worked on the budget approach (with two incomes) of keeping in our offset account funds to pay of the credit card and minimal cash for other expenses, transfering all other monies to the homeloan. With this model, we find it easy to live of 'what we need, as opposed to what we have'. Going to one income will still allow us to have the current 'needed' funds for living and the extra for child one, along with servicing the say $40k and an investment (provided we have a tenant most of the time).

My concerns with waiting are:

1) The bank will only lend about $250k, limiting the buying opportunities
2) we will end up delaying for ever buying IP one, as life will become to busy

regards,

Nic.

 

[Aceyducey]

Nic,

Congratulations & welcome to the forum.

Buying your first IP can be a stressful process and frankly would place a much larger burden on you and your partner through the pregnancy and immediately afterwards as you adjust to the new addition & manage on less income.

Property is largely flat at the moment & while there are some good buying opportunities, I don't anticipate you will lose a great deal on CG in most places by delaying until you've finished chewing on everything you're about to swallow.

Your concern about delaying forever is only valid if you're not committed to an investment route. The only reason you'd be too busy to look out for the future of your family is if you choose to be too busy.

So first things first, deal with the car - you don't need an expensive one, just a mechanically good one...for example we only have an old one which the kids can wreck - vomit, litter, eat, etc...we'll buy a nice one when the children are gone.

The deal with the baby & income, then - when your life is balancing again - deal with the property.

Cheers,

Aceyducey

 

[NicW]

Thanks for your inputs.

Cars, I agree, are a dead cost. I will buy new however, as I get staff price! This means I can sell it one year later and hopefully make a profit on the purchase cost, if not a small loss. At the same time, its under warranty and shouldn't need tires etc.

I will wait for an IP, unless something comes along. In the mean time I will pay the car off.

thanks,

Nic.

BTW... just finished reading 7 steps to building wealth - a great book.