who has these $400k mortgages ?

[meljup]

we are a single income family earning under 100k with a 400k mortgage, we have 5 children, and could easily afford more.
we do not have car loans or credit cards, and have a tv that was given to us when a relative with significantly less assets bought a plasma.
It is all about priorities and how you budget.
We live in Perth, and couldn't buy a 4x2 much cheaper than we did, it is 30 years old.
we didn't blink at the rate rise, we factored a lot more than that in when we did our original budget.

 

[Twitch]

What can I say, I'm guilty of an absurdly large PPOR mortgage. It all started with buying a really crappy house on a great block in a great street in a great suburb. Then the 'trouble' began as we started renovating . Never underestimate the cost of reno'ing a rundown period house

 

[wagnman]

I thought the idea was to try to pay off the mortgage on your PPOR as fast as possible because its non-deductable debt?

 

[moyjos]

We started out as DINKs (still are actually), with combined salary of $100K.

First PPOR was bought with 5% deposit and 350K mortgage, and I thought that was "reasonably" manageable and fairly average.

Close friends, DINKs on combined 95K recently bought first PPOR in inner ring Perth suburb with 600K mortgage
I asked them why they didn't at least "try" and keep it under the 500K stamp duty exemption..."wouldn't want to live in one of those places!"



Chris

At the risk of sounding OLD
This is what is wrong with the youth of today LMFAO!!!! OMG I am my mother!!!!

I personally beleive there is not so much a housing crisis as much as an "expectation crisis"

My son (23) has just bought a 3br townhouse in Woolongong. He is copping flak from some of his "friends" becuse it is not flash enough (Only one bathroom, single garage etc) He knows he will be the one on top in a few years when they are still struggling to make the deposit for their 700K + McMansions.

I wanted to divide a large house I had seen recently into 4 flats and provide "lower cost rentals" as that is what is apparently lacking in the market.
I showed my plans to a PM friend of mine who screwed up her nose and said they would be hard to rent because they are not new
The next day she showed her boss- and was told to ring me and tell me that if I went ahead with it they would not handle them as:
1: the rent was not high enough to warrant their time( I was planning on 200 -225 for a 2br flat and 150-175 for a 1br)
2: A property like that would not be a "fit" for the image of the agency.

(shrugs) Back to the drawing board.

Cheers
Sue

 

[The Y-man]

I thought the idea was to try to pay off the mortgage on your PPOR as fast as possible because its non-deductable debt?

Usually yes. However, you may then draw it down for investment purposes to make it deductible debt.

Cheers,

The Y-man

 

[meatgroup]

Well I fall squarely into this category .... I am 30, bought our first PPOR for $445k less than a year ago. It is 4km from Brisbane CBD. Loan payments are savage .... $2800 a month on a $419,000 loan. (but I bet its worth about $520K now)

We moved out (thought it would be cheaper to rent and claim expenses) and rented the place out. Getting $370 a week rent. Moved to Perth. Paying a stupid rent of $400 a week, thanks to my lovely employers and broken promises.

We have another IP in north QLD too .... its a block of land atm so not earning an income - there's another $7000 of expense each year. But I intend to build on it so the interest is tax deductable....(another post coming up here)

So yes ... its tight. Now we are pregnant (well, not me, my wife is) with our first child and she will leave the workforce. This will be a telling time for us. We are madly saving but with such costs its pretty bare bones.....

I figure if we can just get by for a couple of years, pay the mortgage and enjoy being parents and living a simpler lifestyle, then we will be ahead in ten years. I have taken a 10 month project in a remote area which will allow us to own the car and put $40k-$50k in the bank to help with things so lets see how it goes....

It is scary .... but we'll get through. I will work nights and eat noodles if I have to. Determined to make it work. You'll see. One day I will be one of the people able to give consdered advice on a site like this....

 

[imonmyway]

At the risk of sounding OLD
This is what is wrong with the youth of today LMFAO!!!! OMG I am my mother!!!!

I personally beleive there is not so much a housing crisis as much as an "expectation crisis"

My son (23) has just bought a 3br townhouse in Woolongong. He is copping flak from some of his "friends" becuse it is not flash enough (Only one bathroom, single garage etc) He knows he will be the one on top in a few years when they are still struggling to make the deposit for their 700K + McMansions.

I wanted to divide a large house I had seen recently into 4 flats and provide "lower cost rentals" as that is what is apparently lacking in the market.
I showed my plans to a PM friend of mine who screwed up her nose and said they would be hard to rent because they are not new
The next day she showed her boss- and was told to ring me and tell me that if I went ahead with it they would not handle them as:
1: the rent was not high enough to warrant their time( I was planning on 200 -225 for a 2br flat and 150-175 for a 1br)
2: A property like that would not be a "fit" for the image of the agency.

(shrugs) Back to the drawing board.

Cheers
Sue

I would get an opinion from another agency

 

[Chris.R_WA]

Cheers Sash and Moyjos,

I considered that we were taking a conservative risk with the size of the mortgage we took on. We were both 21 and literally beginning our careers.
Combined DINK income is now up to 135K, and mortgage is still 350K (IO now as we have converted it to an IP).

We pay $210pw to live in an even worse place than our original PPOR (which is on a 947sqm, 4-unit development site btw), and our friends freak out every time they come over for dinner

I actually think its quite funny, but in a bad way...you are right, they told me that another rate rise or two and it will be curtains.

Regards, Chris

 

[WillG]

we are a single income family earning under 100k with a 400k mortgage, we have 5 children, and could easily afford more.

Thats amazing considering the price of petrol, insurance, rates and other necesities

 

[kegger]

If there is anyone who is LOE, I would be interested to know how high your non-deductable mortgages are. One would assume that if you are sucesfully LOE then your nondeductable mortgages would run into the millions over a 10 or 15 year period, depending on how much you spend of course.

 

[Quakin]

I'm looking at borrowing about $400k in the next few months to get my first property. I'll be doing it by my lonesome and be living off of the rent (and my savings when I'm without a tenant).
Come a few years down the track I should be earning a bit more and it'll be happy days

 

[kamchatsky]

Me and my wife (no kids) has total income of 170K pre-tax. Bought my PPOR at Cherrybrook (Sydney) for 665K on 85% LVR. Loan is 565K. Yes it is our first property but we consider ourselves good savers so we should be able to save. But we definitely are doing some family planning in the future on this.

At the end I reckon in Sydney it is actually less risk to buy a place in good location, then see your equity go down because you buy cheaper suburbs (where there are plenty) and full of first home buyers. That is what's happening in Sydney right now. I believe in buying quality than buying cheap I guess.

 

[Dis]

Mortgage of PPOR bought in 2004 was 360K. I was single at the time. With the benefit of 2020 hindsight I should have bought a better property in a better suburb. I dont think there is anything wrong with first home buyers buying expensive houses with large mortgages provided that they can
a) Meet the repayments if interest rates rise
b) Meet the repayments when they start a family
c) Have some sort of buffer (money in offset account, etc) should the unforseen occur.

In short they should buy the best house they can afford. But, when determining affordability they should look at future circumstances not current ones.

 

[CairnsInvestor]

I'll go against the trend here & say there's no way I'd go & borrow $400k of non-deductible debt. To the people who borrowed $600k, I think you're crazy! Each to their own I guess. I'd rather leapfrog from a smaller $200k unit to maybe a $270k smallish house to a larger $340k house, etc, etc (each time when you've sold you've made money, increased your equity, so when eventually you buy that $400k or $500k property you're only borrowing around 60-70% of the total. I mean to borrow $400k is $615 per week just to pay the interest bill + rates, water, maintenance, etc on top so almost $700per week just to live; & not paying a single cent off the mortgage. You better hope that the R/E market in which your PPOR is located is rising!!! Cheaper to rent IMO unless like I said before the market is rising fast! Rent the $400k place for $350-$380 in rent; & then buy IPs at $400k & use the money saved to fund shortfall on 1-2 IPs.

 

[Lukey13]

I'll go against the trend here & say there's no way I'd go & borrow $400k of non-deductible debt. To the people who borrowed $600k, I think you're crazy! Each to their own I guess. I'd rather leapfrog from a smaller $200k unit to maybe a $270k smallish house to a larger $340k house, etc, etc (each time when you've sold you've made money, increased your equity, so when eventually you buy that $400k or $500k property you're only borrowing around 60-70% of the total. I mean to borrow $400k is $615 per week just to pay the interest bill + rates, water, maintenance, etc on top so almost $700per week just to live; & not paying a single cent off the mortgage. You better hope that the R/E market in which your PPOR is located is rising!!! Cheaper to rent IMO unless like I said before the market is rising fast! Rent the $400k place for $350-$380 in rent; & then buy IPs at $400k & use the money saved to fund shortfall on 1-2 IPs.

I think the same way...

With a gross income of nearly $200K between us, our PPOR (worth $400K) has a mortgage of $240K. Of course we cannot stop talking and thinking about having a nicer house, but our way of achieving this was not to simply go out and add a few $100Ks onto our non-deductible debt just to struggle to pay it off over a couple of decades. After all, we do like many "lifestyle" commodities such as annual overseas holidays.

So rather than the $500K non-deductible PPOR mortgage we decided to pick up a few investment properties, hang on to them for a few years before selling everything and getting a much nicer PPOR without the hefty mortgage. Also looking at sub-dividing and building on our large PPOR block. After that I'm happy to borrow much of the equity away as deposits for deductible debt IPs.

Whilst we could probably afford it, I wouldn't feel comfortable paying $800/week paying off a single property when I could get away with spending that same amount on say a cheaper PPOR plus four IPs.

 

[alexlee]

I'll go against the trend here & say there's no way I'd go & borrow $400k of non-deductible debt. To the people who borrowed $600k, I think you're crazy! Each to their own I guess. I'd rather leapfrog from a smaller $200k unit to maybe a $270k smallish house to a larger $340k house, etc, etc (each time when you've sold you've made money, increased your equity, so when eventually you buy that $400k or $500k property you're only borrowing around 60-70% of the total. I mean to borrow $400k is $615 per week just to pay the interest bill + rates, water, maintenance, etc on top so almost $700per week just to live; & not paying a single cent off the mortgage. You better hope that the R/E market in which your PPOR is located is rising!!! Cheaper to rent IMO unless like I said before the market is rising fast! Rent the $400k place for $350-$380 in rent; & then buy IPs at $400k & use the money saved to fund shortfall on 1-2 IPs.

Again, just the PPOR loan balance doesn't give you the whole story. For example, I have a PPOR debt that's above 400k. Would you think differently if I told you I have even more than that in deductible IP loans, and that my PPOR (gross value) is only a small part of my overall portfolio?

I buy cheap properties as IPs, precisely because of your reasoning above. I never even looked at how much the PPOR would rent for when I bought it. You know why? Because I don't intend to rent it out anytime soon.

Is buying an expensive PPOR financially smart? Not really. It IS cheaper to rent. But buying also has its advantages (ones I've been trying to avoid for the last couple of years as I bought IPs): mainly that 'this is MY house' feeling. How much is the feeling worth? Well, that's a personal question.

I was in a position to afford it without damaging my investment plans (much). For example, I can still refinance existing IPs and still continue to buy.

CI, your views on this will probably change as your portfolio grows. A 600k PPOR mortgage might seem crazy to you now, but in time.......
Alex

 

[ianvestor]

Is buying an expensive PPOR financially smart? Not really. It IS cheaper to rent. But buying also has its advantages (ones I've been trying to avoid for the last couple of years as I bought IPs): mainly that 'this is MY house' feeling. How much is the feeling worth? Well, that's a personal question.

We just bought a bigger, completely renovated house. It would have made much more sense financially to continue buying older properties in need of renovation, and add value to it ourselves as we have done before. But there comes a point where enough is enough and you just want to live in a nice (finished) house. No money to make, no room to add value, but a pleasure to live in.

 

[twodogs]

We just bought a bigger, completely renovated house. It would have made much more sense financially to continue buying older properties in need of renovation, and add value to it ourselves as we have done before. But there comes a point where enough is enough and you just want to live in a nice (finished) house. No money to make, no room to add value, but a pleasure to live in.

Quite true.

Our very expensive house, with the initially $600k+ loan, is also my biggest investment. I suspect it will appreciate more than any IP I own. Yes, it's too much to spend for a place to live for a tight-ar$e like me, but it's still a growing asset.

We didn't buy the new house, but instead we bought almost the worst house on almost the best street. Our PPOR money is in the land, not the new house/kitchen/home threatre etc.

 

[pieman]

Its not a bad stratagy. My wife and I borrowed heavily 2001 (at the time) 280k for our PPOR and were very concerned about the outcome.
I knew what we were buying had potential as the land was on 1000sqm in bayside melbourne. We made 300k over bank valuation on that deal, and at the time that was big cash. I sold 3 inv properties and purhcased for cash our current PPOR for 1m 2.5 yrs ago. This is now worth 2m+ - all unencumbered.
FWIW dont listen to the poo-poos about too much borrowings, just work your ar$e off and pay as much of the non-deducatble debt down as you can, get another job if you must. ITs worth it in the end.
pieman

 

[meljup]

In some cities, 400k is an entry level property, not a luxurious one.
You need a house to live in, and it has to be big enough to accomodate your family, it is not possible in my city now, to get any house for much under 400k.