Where to buy 1st house in Sydney with 450K?

[sk280]

Hello All,

I have a pre-approval of 450K and have saved around 25K as deposit to buy my first house in Sydney and move in. After initially looking at suburbs in south-west and now deciding against it, and am confused on where to buy.

My requirements are: Reasonable commute to City by Train (less than 1 hr), Good Schools, Possible Capital Growth, Low Crime.

Please suggest suburbs that fit the above. Thanks in advance.

 

[alexlee]

sk280, are you aware of what your repayments will be? 450k mortgage = 36,000 per year interest, add another 9,000 if you pay P&I.

Are you currently spending that much on rent, or does your rent + savings equal at least $3,000 per month?

25k savings isn't much of a deposit for the sort of loan you're talking about.
Alex

 

[sk280]

Hi alexlee, My income is 100K and wifes income is 25K with potential to increase.
Am currently renting at 330PW which is around 17+K in just rent. We arent big spenders. Reason for buying is long-term buy and hold for CG.

How much do you reckon is the deposit I should be aiming for? I want an entry into the market for PPOR and would probably convert this into an IP after few years (4 to 5) with the equity generated by this house. Your thoughts on this strategy?

Thanks for your reply.

 

[alexlee]

Hi alexlee, My income is 100K and wifes income is 25K with potential to increase.
Am currently renting at 330PW which is around 17+K in just rent. We arent big spenders. Reason for buying is long-term buy and hold for CG.

You may not think you're big spender, but 25k isn't much savings for your level of income. My question would be, are you currently saving at least another 25k after all expenses (including rent)? You're going to have to come up with an EXTRA 25k+ (on top of what you now pay in rent) to service just the interest and upkeep (remember you have to pay council rates, etc if you own the place) on a 450k place. Your interest bill will be 36k, council rates, water, etc another 2-3k, repairs, etc another 2-3k. If you want to pay P&I, that's another 9k.

How much do you reckon is the deposit I should be aiming for? I want an entry into the market for PPOR and would probably convert this into an IP after few years (4 to 5) with the equity generated by this house. Your thoughts on this strategy?

It's not so much how much deposit you should have. It's the fact that you only have $25k in savings on $125k+ income. This suggests you aren't saving much as a % of your income. And you're planning to more than double your housing expenses. It's cashflow, or lack thereof, that will break you.

I may be totally off track here. For example, you might have had a big pay increase recently. However, just on the numbers you've given, I'd say you should take a hard look at your spending.

Another strategy you might consider is buying IPs FIRST, and keep renting.
Alex

 

[BV]

Sk280

I wonder why you decided against southwest.

If I had $450K I would look for a relatively new place in Wattle Grove and walking distance to Holsworthy train station.

In the mornings there are express trains to the city so you will be there quicker than if you drove and there is a big carpark at the train stn.
There are schools, a shopping centre with Coles and other shops.
There is also easy access to the M5 and through that to the M7 and M2.

There are a few options on the Northern side but it will be a longer trip to the city.
Do you need to be close to schools and shops?
Do you both work in the city?

Also, if you don't mind living in a unit, with $450K you can buy something much closer to the cbd. It will be more convenient but it won't necessarily be safer.
Cheers

 

[sk280]

Hi Bill,

Wattlegrove/Holsworthy was the first suburb I had short-listed and looked around. Friends and relatives advised against it due it being a part of the liverpool council. Moreover they were very skeptic about appreciation over time and suggested I look around Paramatta-Blacktown corridor. Infact in replies to my first post, I was adviced the same. Being new to Australia (yes am an immigrant), I'm not in a position to decide which way to go.

Whats your opinion on property appreciation around Wattle Grove/Holsworthy areas in the long term? If I were to choose between Wattlegrove/Holsworthy and Wentworthville/Toongabbie/Hills, what would you recommend and why?

Another big question looming for me is to with the perception of south-west esp. Wattlegrove/Holsworthy areas, why is not regarded the same as suburbs around Paramatta/Blacktown corridor where the hype seems to have settled now?

I would appreciate as many replies/opinions from forum members regarding investments in south-west esp.: Wattlegrove/Holsworthy?

Thanks again for all your replies.

 

[stumunro]

If it's a PPOR I would be more inclined to choose a place based on where you want a live. Have a drive around, check out the different areas and choose a place suitable for your needs. 4-5 Years doesn't sound like a long time but it is if you choose something to live in for the wrong reasons.

 

[chran]

I have a pre-approval of 450K and have saved around 25K as deposit to buy my first house in Sydney and move in.

Please read & re-read alexlee's post and make sure you have the establishment costs covered. I agree with him that you should have another 25k+ (shouldn't be too hard at your household income).

Me & better half did a similar thing in Melbourne, we used small deposit + LMI for a 425k PPOR. We didn't have much money upfront for deposit but can service the loan with no problem. However the establishment costs surprised us (wish someone like alex warned us back then; where were you alex ). Thankfully in the end we came out OK (had money in shares to cover the extras).

 

[BV]

SK280

I guess it depends on what work you do (if you want to be close to work, the way you will travel to work ( car, bus, train) , Your family's school needs, where your friends and relatives live, your weekend interests etc etc.

I have looked at Wenthworthville/Toon before, I think the 2 areas are similar
but I personally think Wattle Grove/Hols area is nicer.
Have a closer look at both and see what they offer and also compare traveling times to the city and train times and frequency.
Also go and visit the Paramatta shopping centre and the Livepool shopping centres and then put all the parameters down and decide.

From the capital appreciation point of view IMO there should not be much difference.

Cheers

 

[sk280]

Yes would probably wait for a few months more before entering the market. Am just curious and concerned if it would make a big difference buying now or buying few months later (6-8 months)? As in would I have to catch up with the market with pundits predicting the upturn in Sydney?

Chran, Yes I'm thinking of getting 95% loan with 5% deposit + LMI. The repayments work to around 1500 fortnightly. Would a buffer of around 10K be allright for establishment costs?

As Alex has suggested? Would it be a better strategy to buy an IP first, take an interest only loan, negative gear the IP and wait for equity to build before buying the PPOR? What would be the pros and cons?

Thank you all.

 

[alexlee]

Yes would probably wait for a few months more before entering the market. Am just curious and concerned if it would make a big difference buying now or buying few months later (6-8 months)? As in would I have to catch up with the market with pundits predicting the upturn in Sydney?

My advice to wait a few more months isn't market related. If your monthly savings + current rent is at least $1,500 a fortnight, then you can afford the mortgage (for now). The extra couple of months is just to make sure you CAN actually pay the mortgage.

Chran, Yes I'm thinking of getting 95% loan with 5% deposit + LMI. The repayments work to around 1500 fortnightly. Would a buffer of around 10K be allright for establishment costs?

That's interest only, though. My concern is how much spare cash you have to allow for repairs, interest rate rises, etc. 95% is 427,500. Just interest only would be $1,315 a fortnight. Is it possible? Yes, if you save diligently. It's a big jump from your current rent, though. My question remains: how much are you saving now on a monthly basis? Include everything, because the bank isn't going to care if you have to repair the car.

As Alex has suggested? Would it be a better strategy to buy an IP first, take an interest only loan, negative gear the IP and wait for equity to build before buying the PPOR? What would be the pros and cons?

Pros: you get all the deductions, you can continue to rent (relatively) cheaply, and as a long term thing, you don't get too emotionally attached.

Cons: you can't use FHOG (but this can be saved for later), you might lose the stamp duty exemption. You'd have to continue to rent.
Alex

 

[Cherry Pro]

Hi SK ....I agree with BV ... think the Wattle Grove area is nicer / more family friendly than Toongabie / Wenty ... however, if it's a choice between Holsworthy and Baulkham Hills (you might be able to find an older property in BH for about $500k), I will definitely go with Baulkham Hills ...but you would need to drive around ... get a feel of each suburb and decide on what suits your family's needs best.

Don't think there's too much of a difference between Westfields at Liverpool or Parra but Parra is bigger for sure and may be a tad nicer.

Cheers

 

[BV]

SK280

I want to add a poing to Cherry pro's comment on Baulkham Hills.
I believe there are express busses travelling along the M2 to the city.

If for example you found an older place near Baulkham Hills/Winston Hills
and caught one of those busses it could possibly work.

btw, if I was looking for my first home I wouldn't overspend.
I also wouldn't be worried about crime, because apart from a few small pockets, most areas of Sydney are quite safe.

Cheers

 

[twobobsworth]

I believe there are express busses travelling along the M2 to the city.QUOTE]

Just add $12 per day to you expenses!!!

 

[BV]

I believe there are express busses travelling along the M2 to the city.QUOTE]

Just add $12 per day to you expenses!!!

2Bob
$12 is probably less than the daily petrol + wear & tear of your car
Cheers

 

[alexlee]

As if you could park in the city anyway.

 

[sk280]

Hi Alex and all,

I understand about having a buffer after the deposit. However going with the current perception amongst investors/buyers about recovery of Sydney real estate, would you advise I save around 30K for the next 5-6 months to buy a 450K property (or) would it better to save around 15-20K and buy a 350K property in the next 2 months? Either way, I can only pay a 5% deposit, rest being the loan + LMI.


Reason for posting this question, my mortgage broker advises me that the market is going up every month by 10-15K and more I delay, more I would have to catch up to the market? Though I believe 10-15K appreciation is a wild exaggeration, would I still have to catch up if I wait another 6 months at most?

Thank you all for your valuable replies.

 

[alexlee]

I understand about having a buffer after the deposit. However going with the current perception amongst investors/buyers about recovery of Sydney real estate, would you advise I save around 30K for the next 5-6 months to buy a 450K property (or) would it better to save around 15-20K and buy a 350K property in the next 2 months? Either way, I can only pay a 5% deposit, rest being the loan + LMI.

Reason for posting this question, my mortgage broker advises me that the market is going up every month by 10-15K and more I delay, more I would have to catch up to the market? Though I believe 10-15K appreciation is a wild exaggeration, would I still have to catch up if I wait another 6 months at most?

Your broker may have some incentive for you to buy earlier, you know. Think of it this way. You're looking at properties around $400k. If prices are really going up by $10k a month, that would be a 30% increase in a year. Does that make sense to you?

In the end it's up to you. If you believe you can make the payments, and you believe the market is heading up, go ahead. If you do go ahead, though, I would be very careful about my expenses going forward. Cut your expenses deep. Better to save too much than be caught short.

Also buying a $450k property and buying a $350k property are VERY different. There is a $700 per month difference in repayments, for one.
Alex

 

[buzzlightyear]

Yes would probably wait for a few months more before entering the market. Am just curious and concerned if it would make a big difference buying now or buying few months later (6-8 months)? As in would I have to catch up with the market with pundits predicting the upturn in Sydney?

Chran, Yes I'm thinking of getting 95% loan with 5% deposit + LMI. The repayments work to around 1500 fortnightly. Would a buffer of around 10K be allright for establishment costs?

As Alex has suggested? Would it be a better strategy to buy an IP first, take an interest only loan, negative gear the IP and wait for equity to build before buying the PPOR? What would be the pros and cons?

Thank you all.

Stamp duties, registration of transfer of land/mortgage costs come up to $15,920 based on a $450k purhcase prices and 5% deposit. With a 5% deposit (22.5k), that means over $38k in cash required to fund the property.

LMI will probably be arond $9k (based on ~2% of loan), and if its capitlalised into your loan, your loan will be ~ $437k. Interest only payment (8.57%) this means a $3,121 payment per calendar month

Your MB's comments about the property market isn't a good advertisement for his knowledge or expertise. Sounds like an ex car salesman.

 

[BV]

Hi Alex and all,

I understand about having a buffer after the deposit. However going with the current perception amongst investors/buyers about recovery of Sydney real estate, would you advise I save around 30K for the next 5-6 months to buy a 450K property (or) would it better to save around 15-20K and buy a 350K property in the next 2 months? Either way, I can only pay a 5% deposit, rest being the loan + LMI.

I would probably save the $30k in the next 6 months but I would go for a $350K place instead.

It's not a good idea to overspend when buying your first home.

Additionally, IMO the market is not moving as fast as your broker is telling you.

Cheers