When to buy?

[MelbEngineer]

I am trying to figure out when is the best time to buy a house, for my situation. My situation is thus...

I am looking for my first property and am currently earning 40K but am starting a new job in two weeks in which I will be earning 50K, as my base salary. Now I have already had pre-approvalto borrow about 230K in my current role - based on a fixed rate. I figure in my new role I will be able to borrow maybe 50K more allowing me to buy something a bit better.

I want to buy something to live in and my problem is that I am renting at the moment and the lease runs out in December. This doesn't give me much time to buy, considering the amount of time settlements take.

So I am thinking I will have to rent for another 6 months or so then buy something, OR buy something in the next few months and perhaps rent it out. I want to get the first home buyers grant, which means I am supposed to live in it for 6 months of the first year. So hence my confusion! Just wanting people's thoughts.

 

[Sunfish]

After Fear and Greed, Impatience is the third deadly emotion in investing.

The market will still be there in six months and will not have run away from you, I don't think.

 

[kaf]

You could also gently asked if your landlord would be happy with a 3 months lease after Dec which would then give you plenty of time to buy and settle. Have you started looking yet? It took us way longer than 2 weeks to find and buy our PPOR.

Also, given the low vacancy rate breaking the lease is not such a big drama at the moment. Yes you do take the risk of having to pay the rent until they find a new tenant but if you are in a good rental area that should take no time at all.

Just a thought

kaf

 

[WildDog]

I am trying to figure out when is the best time to buy a house, for my situation. My situation is thus...

I am looking for my first property and am currently earning 40K but am starting a new job in two weeks in which I will be earning 50K, as my base salary. Now I have already had pre-approvalto borrow about 230K in my current role - based on a fixed rate. I figure in my new role I will be able to borrow maybe 50K more allowing me to buy something a bit better.

I want to buy something to live in and my problem is that I am renting at the moment and the lease runs out in December. This doesn't give me much time to buy, considering the amount of time settlements take.

So I am thinking I will have to rent for another 6 months or so then buy something, OR buy something in the next few months and perhaps rent it out. I want to get the first home buyers grant, which means I am supposed to live in it for 6 months of the first year. So hence my confusion! Just wanting people's thoughts.

You cutting a bit thin there just a quick figure in my head..
with your salary (50K) and a 240K mortgage, half of your income is going to pay the mortgage at 8% interest..
and 50% is a high proportion of your income servicing the debt...and you may struggle if there is interest rate rise. I leave a buffer of 2%

Maybe save a bit more and borrow a little less... maybe borrow $160-180K or something on that salary.

what you want is prepare for the worse hope for the best.

 

[Harris]

and you may struggle if there is interest rate rise. I leave a buffer of 2%

why not fix the rates for 5 years @ 7.45% and not worry about the buffer.

 

[ledd]

I want to buy something to live in and my problem is that I am renting at the moment and the lease runs out in December. This doesn't give me much time to buy, considering the amount of time settlements take.

You could get a shorter lease or even rent week by week after the lease runs out if the PM doesn't ask to renew it. I lived in a place for year or more after the first 6 month lease ran out. I just didn't bother renewing it. That was in Sydney.

I guess you could also sign for another six months and get someone else to take over the lease or dare I say break the lease. More than likely you'll have a lot of people in your area looking for a place. I just bought a place and I've had to break the lease. They advertised for $30 more and plenty of interest.

I'd advise renting for a few weeks after settlement. The settlement may be delayed and it takes a little stress out of the situation.

Cheers,

Mark

 

[MelbEngineer]

You could also gently asked if your landlord would be happy with a 3 months lease after Dec which would then give you plenty of time to buy and settle. Have you started looking yet? It took us way longer than 2 weeks to find and buy our PPOR.

kaf

The problem with this is that I am living with my girlfriend in a tiny apartment and we both agree that we are too cramped and really want to find something bigger and with less cracks in the wall! So it sounds like we will need to rent somewhere for a few months after December, then I will have saved up more money for a deposit.

 

[alexlee]

The problem with this is that I am living with my girlfriend in a tiny apartment and we both agree that we are too cramped and really want to find something bigger and with less cracks in the wall! So it sounds like we will need to rent somewhere for a few months after December, then I will have saved up more money for a deposit.

What you can do is renew for 6 months, and if you buy a place before then, say to the landlord that you'll keep paying as long as it's vacant but can they please look for a new tenant? With vacancies the way they are the landlord should find a new tenant quickly.
alex

 

[WildDog]

why not fix the rates for 5 years @ 7.45% and not worry about the buffer.

A buffer is a margin of safety and it cover you, when sh*t happens, you out of a job for a few months, you on long term sick leave and you don't get pay the full pay rate etc. It's sensible for someone who start out not load themselves with debt and be able to navigate and survive in difficult times.

Your thinking along the line of a mortgage brokers, borrow to the max lock it in no worry for 5 years. Just because you can borrow the maximum amount doesn't mean you should take it.

My breaching is safe borrowing and people can survive in difficult times.

 

[kaf]

The problem with this is that I am living with my girlfriend in a tiny apartment and we both agree that we are too cramped and really want to find something bigger and with less cracks in the wall! So it sounds like we will need to rent somewhere for a few months after December, then I will have saved up more money for a deposit.

Hi

Fair enough wanting to move but if your own place is that close on the horizon I'd do a quick calculation how much it would cost you to move out of your current place (including the probably higher rent of a larger place) compared to sticking it out for just a few more months with the added excitment of trying to find your own place soon. Also you could use the time spend trying to find a place to rent for finding one to buy! Often the time around Xmas is a good one for picking up ugly ducklings and other bargains so again your timing could be spot-on with a short term extension of your lease covering you during settlement.

Moving always costs money so staying put for a bit would be your most cost effective approach, getting you that larger deposit a bit quicker. However if you want a larger deposit and postpone buying to say mid next year then it sounds as if you might want to move.

Very exciting though and good luck with finding your first place to buy!!

kaf