By - NewRhapsodyInBlue
25 and on 90k is really good! I'm going to assume you are in Sydney so look at least 1hr away from the CBD where houses are still in the 800k region (Sydney or should i say western/south western sydney).
House prices have been rising faster than wages, but remember if you're borrowing 80%, every 1k you save can potentially allow you to borrow another 4k.
Best of luck!
Most of the houses out that way aren’t great and even though great growth across Sydney most of those suburbs are below the average growth due to lack of demand, and high density.
Best thing to do would be to save 10% and purchase in the northern suburbs/north west Sydney. Traditionally a much more affluent part of Sydney great transport.
Prices can start from 400k for a single bedroom apartment and I can think of 5 suburbs off the top of my head where you can get to the city in 45mins or less and spend 500k or less.
I know apartments aren’t great for capital appreciation but in terms of ownership, I’d rather be paying off a mortgage and owning something myself than saving for an extra 3 years to afford something 800-1mil.
Find a good broker, have minimum 5% and decent monthly outgoings. I know plenty of people sub 90k that own homes and yes saving pretty much goes out the window but the thing to remember is 90k is only the start and by 30 you could be 120k or more.
Thank you for this! I’m in Melbourne at the moment so house prices are crazy but I’ve heard it being worse in Sydney… there was a bit of fomo with a lot of people buying houses and I constantly wondered how people did it! I’m going to do some research into the first home buyer schemes from everyone who shared it in this thread!
I’m in VIC and bought my house mid last year just before turning 26. 90k salary at this age you should have some cash available to save, I earn similar, but obviously everyone’s situation is different. If your priority is needing cash for a house deposit then you should stop or minimise putting money into shares. Shares is a 5-7 year game at least. You also may not need as much money for a deposit as you think, speak to a broker to understand all of the grants and other schemes you may be eligible for. I purchased a 480k house with 25k deposit with stamp duty exemption and the FHLDS (google it). The reality is that you probably aren’t gonna be able to buy a dream home in a dream location as your first home, and you don’t need to. Look at it as a stepping stone and an investment. Before looking for any tricks and tips to buying a home, you need to ensure you have a solid saving plan set up.
Thank you for this answer! I’m looking into FHLDS at the moment. I’ve been putting it into ETFs for about a year or 2 just to have it grow than to just stay in the bank account but I’ll try to plan ahead in about a year or 2! I’ve heard a lot about the stamp duty adding on extra costs but if there is an exemption then that does seem like god sent !
You might be better off utilising the FHSS than putting $$ into etf’s if you intend to buy in the next couple of years. My husband and I did similar to the above comment earlier this year but utilised the FHSS to save our deposit.
I recommend that you go and talk to a mortgage broker now rather than when you think you’re ready to buy. I wish I’d talked to a broker a year or two before we began the process; they laid out exactly what we needed to do and how to get there. Was excellent.
Will do! Thanks! Was reading up on the fhss and it sounds like it utilises the super fund!
We're in a different phase of the asset cycle to when older people bought, you'll have to play a different strategy to get ahead.
I'd encourage you to learn (from reputable sources, not Redditors) about how debt and asset cycles work before making one of the biggest financial decisions of your life
Every time I get a little house fomo-y I watch ray dalios youtube video on money. Calms me down.
Do you have a link? Interested to check it out.
This is a great one - 'How the economic machine works' https://www.youtube.com/watch?v=PHe0bXAIuk0
So when is the deleveraging going to happen?
Looks like someone has helped me out "how the economic machine works"
Do you have any recommendations for such reputable sources? Been keen to learn more.
Thank you for this! I’ll look into this a bit more and potentially consult my bank regarding the loans and how the repayments work !
29, I work for a major bank and can borrow up to 95%, i only needed 20k for 400k house. plus 5k extra for rates and fees.
truth is i saved up 10k, sold my first car for 10k and went without a car for 6 months and had first home owners grant 10k. i did live in a 2 bed apartment i rented for $330 a week 15 minute walk from cbd and my office.
whilst not having a car i saved up the money i saved from loan repayments, got my yearly bonus and tax return and by the time my house settled i had about 30k saved, plus 10k fhog.
any recent money needs to sit in your account for 3 months to be “genuine savings” plus you should make regular contributions to your savings anyway.
bought a new car as well (after i got approval for home loan).
it’s doable. some banks will lend to you at 95% if you work in a trustworthy profession like medicine, law. or you can go through higher interest rate companies like key start or equivalent. if you don’t live in syd or melb it’s possible for you to save and own your own home but just remember your first house won’t be your dream home and that’s ok. you can always sell it later and buy another.
i don’t pay LMI as a perk of being a bank employee so that wasn’t an issue.
i bought a 3bed x2.5 bath 2 story townhouse, 25 minute drive with traffic to cbd, and located near major shopping centre in the suburbs, working class.
just wanted to add, don’t borrow more then you can afford on your life style, work out your monthly mortgage repayments, and calculate an increase of interest rates maybe by 5% to be cautious and how that will affect your life style. i saw a friend borrow 550k and now he struggles under the burden.
Nice! I also work at a bank. I read in your post that you can only go to 95% LVR and went ha sucker I can go to 97.5% until I read you have LMI waived and I think that’s possibly event a better perk 😳 EDIT- forgot I also get 20% off LMI
Oooh I want to know where you work! I've worked at 2 of the majors (including currently) and I thought 90% no LVR was the standard!
Buy in Meekatharra
Get out of Sydbourne and don’t look back!
This is the correct answer. If you're on $90k a year and are stressing about finances, you need to move. City prices are ridiculous right now, but they can come back if people stop putting so much value in big city living. People forget that there's more to the east coast than Melbourne, Sydney and Brisbane.
I'll be moving into my first home in a month. We're on a combined $75k income.
Get out of the big cities!
East coast small towns are up and above a mil now as well.
It really depend on what your definition of a little town is, and where you're looking to buy. Plenty of 3 bed 2 bath for under 500k up North, usually on 600m²+ blocks.
Get the loan approval whilst working in Sydney, move there and find no job lol.
There's a reason some places are still that price
Do you know what the job scene is like? Unemployment is currently lower than it was in 2012 in some areas.
Yeah but for what kind of jobs? Sounds like the OP works in corporate for a bank as a new grad - not many of those positions in the regions if he doesn’t want to change careers….
What, do you think we don't have banks up here? Plenty of corporate jobs.
If 200k people moved up to North QLD then yeah. We'd have issues. But a few people here and there? Plenty of options.
Head offices of major banks that can offer the same corporate career paths to a new grad as a capital city? No.
So, I suppose he needs to decide if he wants to buy a house at an affordable rate, or live in the city where he has to stress about money on $90k pa.
This is pure conjecture, but let's face it - most people don't choose those corporate careers for the job. It's the wage. If the option for a cheaper home is there, then you can change field, because the point of life isn't to work, it's to live life. Set yourself up, buy a house, start a family. Is it worth it in a city if you can't do those things, as long as you've got the job that you want...?
Like I said, I make way less than this guy, like half what he earns. Our combined income is $75k, and we're about to be first home owners and start up a business, so I can set my family and life up. Isn't that the goal at the end of the day?
Is Maitland and Toowoomba considered East coast?
Living in Melbourne at the moment and the house prices definitely seem crazy!
>how did you guys afford a house later on?
I didn’t. I couldn’t. I’m on $72k a year and bought a house for $630k end of 2020. If I am to enter the housing market now, I can’t buy most of what’s on the market. The one I bought will probably cost $200k more on the market.
Keep and hold. Your property will grow and you will make more money in the future. Only real people making money now are people with houses with land, strata properties typically from my day to day work haven’t grown unless they are in an affluent area being purchased by downsizers.
I’m literally in the exact same position (but female). I’m in Canberra and it’s so hard to find anything even with a 5% deposit.
Hopefully first home loan deposit scheme opens up more positions otherwise I am DOOMED.
im also in canberra with a similar income. explain the first home buyer grants to me? i know the numbers PA are limited but doesn't that just mean you could buy early in the year and be set?
To my understanding it doesn’t reset every year. The government releases a certain number of spots and once they’re full then it’s up to the government whether they open more spots.
My mortgage broker said more spots should open up in feb so fingers crossed.
There's a cheat code if you marry you can double your savings goal and if your extremely lucky your partner comes from a rich family that can boost your opportunities but also rare.
Start small. While you're single consider buying a 1 bed apartment in a convenient area, close to public transport and shops. At least you'll be paying a mortgage rather than rent. Later if you meet someone and decide to buy a bigger place together you can sell it towards a deposit.
You have your foot in the door, and will get regular wage rises as you progress.
Apartments have high outgoings though which renters don’t have to pay and 1 bedders in affordable areas don’t really increase in price (at least anymore) or sell easily due to oversupply. OP will likely lose money when selling
Not even close to being true lol. Unless you go for high end apartments. And the truth is you don’t sell an apartment (I currently recommend hosting for 10 years) all you do is refinance pull 80% equity if needed and go into a new home while renting the apartment. I see it time and time again and my clients thank me for the advice as apartments have shocking appreciation but after a few years you will start to get some decent equity.
Did you read my post below? The one I purchased in 2012 (before rescinding contract) has had zero appreciation. Not even in line with inflation
That’s a you problem. Just because you had a bad experience doesn’t mean everyone else will experience it. I can tell you so many suburbs to avoid and mostly apartments that will stay stagnant.
Now if your objective is to buy as you’re sick of saving and really really want a home I don’t see an issue with buying a property with little appreciation. Just because there isn’t appreciation now doesn’t mean over time there won’t be. Also 2004 - 2012 was a stagnant market with little growth. You could buy and live for 5 years and then convert into an investment and buy another home providing you have the funds. I know for a fact I’d rather own and trend sideways than rent and have no underlying asset at all.
The main thing is to buy where there’s not a glut of homogenous homes and if you are going to buy in such an area make sure there’s a reason to live there (business park, cities, transport, recreational facilities) so that at least your property will always have a level of underlying demand.
I know several other people who’ve purchased apartments and had similar experiences. 1 bedders are by and large poor purchases with the exception of very blue chip areas with limited stock. A colleague in my previous job owned a 1 bedder in Elizabeth Bay in Sydney and saw huge capital growth. A cheap 1 bedder in bog standard suburbia will not
Yes I agree with that and that is common knowledge. What I’m saying is in the case of OP being single and living in a capital city is a disaster financially and affordability wise. If they want a property go and buy one that you can afford. Your first home is a stepping stone and you have to look at the opportunity cost.
If you want a home and are happy to pay a mortgage down with no capital appreciation then by all means that’s great for that individual. Think logically, the property can be turned into an investment down the track and equity will be achieved.
Even if you put 100k into the stock market gains aren’t promised and the chance losing everything is higher than losing your home and if your stock goes to zero that’s it where at least if you lose 100k of value of your home at least the banks won’t be banging your door down.
Not true. depends where you buy. I bought off the plan 1 beddy in Canberra for 380k 5 years ago and recently sold it for 460k. It greatly enabled me to save and build a house in a new suburb whilst building equity. Whilst you’re in the unit, you’re saving shit loads money. If you further make your loan interest only variable, as cash builds up in your bank account, your monthly payments go down. Towards the end of my time there, whilst the rent around the area was 460 per week, my weekly mortgage payment was around 170 bux. That was additional money in my pocket rather than some investors. I believe apartment first then house is the way to go for new generation because market is moving quicker than they can save.
Yes but that’s just breaking even after paying stamp duty, legal fees and the agent’s commission and advertising fees after selling. You also have to pay probably 5k+ yearly for body corp fees.
I’m in Canberra too and signed a contract to buy a 2 bedder in the Linq development back in 2011-12. I ended up rescinding the contract after the developer asked for more time to finish building with no sweeteners besides a very slightly nicer cooktop. Similar apartments are now selling for about the same as I paid back then. The house that I bought instead in 2013 has more than doubled in value. I’m not planning on selling but it’s nice that if I was, I’d least get my money back and a bit extra. I’m not a fan of the whole housing as an investment thing that’s so big in Australia but conversely, those kinds of apartments are really just forced savings accounts with extra fees and limited liquidity.
I wouldn't recommend a 1 bedroom. But a quality 2 bedroom unit in a good location can be a wonderful start, and can be had for 400/500 easily (maybe not in syd/melb)
Yep even most single people want a second bedroom or study, let alone couples or families
I agree with this but buy carefully- ideally a 2bedder; brick walk up in an older unit block.
You can afford this on your wage and can get these in good areas.
Target your locations then set your search criteria to 2 bed, 1 bath and 1 car (minimum) and you top price.
Check the map view too and see what you get when expanding search area a bit.
From a Google search the average Australian wage is over 62k a year.
Earning in the realm of 1.5 times that, you'd think it would be quite easy to acquire an average home.
In the vast majority of countries in the world it would be incredibly easy in your situation.
Should we be furious that it isn't? Or should we feel lucky we live in a country that is in all other respects fantastic?
I've toiled over the answer to this question for a decade.
If you’re talking Sydney and you want a decent home 30mins - 1hr from cbd and then home is newish you’re looking 1M + easily and if you go north west they start 1.2 - 1.3m.
My broker said average income is around 85k he sees via his loan applications and maybe 1 in 50 people have an income over 200k.
Realistically a single person on 85k would take 4 year to save enough for a home like this buy then the mortgage repayments will be quite tough to pay solo.
Best case is to stick 700k and under if you’re solo so you don’t suffer too much and have some money left over after repayments.
A mortgage of this size will take up 50-70% of your salary so it really puts into perspective how hard it is for someone single to buy a property these days.
Time. Keep saving 10-20% of your weekly income till your 30 and buy a place for around 600k.
If there's non in your state buy interstate.
Why would you do that? If you live rural that may reasonable but major cities that isn’t a great idea. If you’re saving 20k a year for another 5 years yes you have 100k + interest but the opportunity cost of buying now and receiving capital growth + lowering your mortgage far outweighs holding.
If I held for 5 years and saved an extra 100k + interest I would have missed out on 600k growth. If you buy now and use the mentality of smashing mortgage you have the ability to generate your own equity and that also generated by market growth.
In cases of no growth or decrease in price you can hold the invest and draw 80% of equity if needed to fund a new purchase. I don’t recommend this though.
THE market WILL NOT keep this sustained growth.
I'm a property owner.
It will stagnante for the next few years.
NO rush to buy.
Ok I’m assuming you deal with property everyday and deal with buyers, sellers, renters and brokers? If you don’t and you rely on AFR and property reports you’re data is 1. Old and 2. Incomplete.
Property may flat line and you may be correct, but it may also grow and purchasing power may decrease. Gone are the days of 80s, 90s & 00s markets. People are viewing property on a daily basis and 50% of the adult population in December looked at homes online. Also with the capital appreciation it has given rise to developing and subdividing homes to create cheaper homes in affluent areas thus creating more demand and leading to more people rising up the property ladder.
I deal with all of the above on a daily basis and I can tell you as long as you have a home that has a demand and you are not unrealistic with pricing you will be sold and sold well.
Don’t forget most owners live in their home for an average 7 years so if you bought 7 years ago at least in my suburb & city you’d have minimum 700k equity without paying cent off the mortgage for a home and 150k - 400k for an apartment or townhome. As long As there’s equity and lending is attainable there will be a growing demand + with the bank of mum and dad sitting pretty many people in their late 20s and early 30s have access to more capital than ever before.
It’s also in vogue to own a home and flaunt success these days so even though that does only represent a small segment sometimes the smallest drum can beat the loudest.
Your just a pleb real estate agent.
You've got no idea.
Hahaha yeah good one - if I was just a real estate agent I would know half of what I know. Nice try though, and nice way to make it personal. I’m here trying to have a constructive talk as sometimes on reddit you find nice individuals with other views that can lead to your own growth.
Go look at all the spread sheets and analysis you need my friend. I have a double degree in finance and accounting after after much research I know way more than you’re textbooks and internet research will ever tell you. I was like you once and as soon as I actually made some life choices and took risks I can say that I know exactly where you are in life and you’re exact mindset.
How awful is it that you still resort to personal attacks and cannot stay on topic of a constructive conversation. Please enlighten me with your thorough analysis as to why I’m a pleb and why I’m just an agent?
1. Agents probably make more than you
2. Not all agents are bad (some are terrible roaches)
3. Just because someone deals with property everyday doesn’t mean they are an agent
4. I can tell by the way you speak and interact that you are making less money than you desire and you have a lot of built up jealousy for people that do well and in your eyes aren’t as smart as you.
Move along and maybe for once do some critical analysis. I can tell you 100% neither you or I are 100% right but what I can tell you is that from what I see, we will be worth more in 5 years than we are today unless we have a catastrophic event leading to mass defaults and disharmony.
Keep your head up and you too one day will achieve your goals. Imagine working week to week saving week to week and then having the inability to interact with someone who challenges you in an orderly manner. I know this is where you are at and how hard it must be to save for years for a home then go on Facebook and see people your age 15 years ahead of you.
If you want I can give you tips on how to turn 100k into 300k in a year but I know what you’d say and I know what you’re thinking.
Go read the paper and talk to your accountant friends that also work in a cubicle and save each year for stocks that rise 14% and claim you beat the market. Even you if made 14% on 100k this is still woeful just fyi.
I run into people like you all the time. There’s a reason why I’m happy to talk to you openly with no hate and there’s a reason why you can’t. I’ll let you think about that.
Have a great day!
I'd like to know what spreadsheets you are talking about.
And no real estate agents don't make more than I.
Let’s be real here. The population roughly averages between 60 - 85k. Only 2% of the population make over $211,000 thousand approx.
Chances are already slim and once you combine that with drinking beer on the lounge everyday and not cleaning your carpet it’s clear you are not above that.
I know more agents in that $211,xxx bracket more than any other profession. I have family who are mid 50s renting that money and a few investment bankers mid 30s earning that money but the rest don’t. The ones that do certainly don’t behave like you and I can tell that you are focussing on putting others down and talking about money, which is an obvious sign you know nothing and you make far less.
Look I hope you do make good money but let’s be real you are probably sub $211k based on your behaviour and your living standards.
I’d love to know what spreadsheets you’re talking about too as from what I’m seeing and what I’m doing looks to be completely different and just off one block of land I purchased in late 2020 I’ve already made 600k, so yeah there’s that.
I have many real estate friends they struggle.
We are not the same.
I too bought property feb 2020.
I can assure you many people with money are quite messy.
I am not rich but I'm well positioned.
Good luck with your land sell it while it's hot.
Horses for courses I guess.
Different views and different beliefs. I guess if we’re both concerned about making money and not eating a way that’s bette than nothing.
Go for an apartment imo. Much more affordable for the average person. Get one you actually want to live in so you don't have to care about capital gains so much.
Or even an old school single story unit, fewer outgoings
The recommendations on here are laughable. Save as much as you can. Extend as far as you can and buy in Sydney or Melbourne. Preferably not an apartment.
Move to WA if your profession and lifestyle allow it? Housing is the cheapest of major cities in Australia, salaries are higher (compared to cost of living) too so you'll have a better quality of life. What would cost you $1M in Sydney would be $500k in Perth.
I’ve been thinking about it. My job permits me to do it as there’s a bit of demand but I think it’s more the leap of faith and leaving friends. I might look into the properties around there tbh !
Focus on your cost base, and have a monthly savings goal. It’s so easy to get caught up on FOMO or obsess about what a good target state is, but in reality you’ve can only work with what you’ve got. Hitting that goal every month will feel great and inspire some confidence.
At this point trying to do everything will be super demotivating and a waste of energy. If you’re looking at a house deposit, I would try to forget about investing and ETFs for now.
You’ll likely find that your financial situation will get better and better, promotions, pay rises etc., be sure to give your goals a pay rise whenever you get one and you’ll be knocking it out of the park.
And if you really can’t kill the investing FOMO, just remember you’re paying into your super every month so you’re already in the markets :)
I dont mean to be rude but how are you 29 and making 50k? did you do any study post school or are you the kind of person thats more interested in hobbies and family?
100% people need to stop chasing money just because it’s the thing to do. My stepbrother drives forklifts and makes good money. All the best my guy
I don’t think this is a helpful comment. The OP is still allowed to have stresses in regards to their personal situation. Someone is always going to have it worse but we all make choices and have different fortunes at different parts of life. While I appreciate you’re looking at their post and thinking damn they make more money than me they should just shut up, that’s not the purpose of this sub. Everyone’s situations are different.
This sub is slowly becoming a place for kids to humble brag..
1 year out of uni and on 90k at 25??? And you are here telling us how stressed you are?
You are in the top 1% of the top 1%.
Most people dont even get the opportunity to study and a large portion of those that do still end up working shitty jobs after they graduate, lucky to make 45k. You're fine.
I used nab equity builder to use leverage to accumulate a deposit faster.
Also house share of youre renting to bring your biggest expense down as much as possible.
Keep in mind most people whom buy houses in cities are more supported by parents or have a dual income. It might be a townhouse, apartment or investment in a regional area for you. (Rentvesting)
I’ll check this out! I’m currently living with my sis and partner. We’re all in the health field but I’m not sure if the banks allow a combined loan ? E.g. looking at the income of the 3 of us. My partner and I earn the same amount but she’s a year younger!
> E.g. looking at the income of the 3 of us
As far as I'm aware, they'll only do this if it's the 3 of your names on the title. Otherwise they will be assessing the income of whoever's name is going to be on the title.
Frankly it’s really quite straightforward and some may dare say; easy.
1. Move into share house or live with parents.
2. Save approx 3.5k per month. Use the FHSSS.
3. Do this for 2 years. = approx 84k
4. Target to buy something approx 600k. As a Melbournian, I recommend a 2 bedroom townhouse near a train station.
If you want any more detail please ask 🙂
Thanks for this! I’ve been saving about 2.5k a month at the moment. Mainly due to payments for my car and rent. Renting with my sis and partner in a 3 bedroom townhouse at the moment. I’m looking at the FHSSS but not very sure how it works. Does it take out a years worth of financial returns to help with the initial deposit ? I’ll try to target somewhere around that price if there’s any !
You can deposit up to $15k p/y either via salary sacrificing or post-tax contribution. You can take out up to $30k total of your contributions + whatever contributions you made on those contributions (in my case it was about 7% on top of earnings). If you and your partner both salary sacrificed $15k p/y into your super over the next two years, you could withdraw around $65k for a deposit, which would be more than enough to buy whatever you’re able to under the FHLDS.
To be honest, you probably only need to do it for a year if you’re wanting to buy together. FHLDS has a cap of $700k in VIC, but you probably want to keep it under $600k so you don’t have to pay stamp duty. If you kept it on or around $600k, you could buy with a $30k deposit + a couple of thousand for legal fees.
Edit: also, if you’re on $90k salary sacrifice $15k you would reduce your tax obligation from $24k down to $15k and remove your obligation to pay the Medicare levy/have PHI.
Where are you looking on buying? You'll need to compromise on your first house
Ideally in Melbourne. Currently still trying to figure out a good location. I think my main concern with a suburb is the safety. Heard a ton of break ins from friends who bought houses in places less central. Mainly concerned for my partner and sis as I want them to be safe.
Realistically, you need to be loaded to afford a freestanding house in Melbourne or Sydney. If breakins are something on your mind, apartments are far safer in that regard. Sure it's theoretically possible to break into an apartment on the 3rd floor, but who's going to bother compared to a house you can drive all the way to the front of?
So you will be sharing the place with your partner and sister? Having dual income makes saving up for a deposit much easier. But needing a house for 3 adults rather than 2 (or just 1) means you need a bigger house which needs a bigger deposit.
Talk to a mortgage broker on how much you can borrow and what sort of deposit you may want. Then work backwards and figure out how many pay cheques to reach that. Probably conider looking at cheaper locations and sacrifice the feeling of 'dream home' for now.
Thank you for this! Are the best Go-tos the banks or just looking at brokers with the best interest rates ? I’ve heard a lot about people taking a high interest loan for the first year and refinancing it after with another lower interest loan.
I'd go with a Mortgage Broker. Look at ratings in your area on google to gauge how good they are and give them a call. They will walk you through the process and ask what your plan and goals are. Be 100% honest with savings and spending habits. Trust that they will have seen utter dogcrap clients before you and don’t be ashamed if you have any skeletons.
They are free to use as they get paid via the mortgage lender and no cost for you.
My first mortgage I went and had two companies look after me to the point of signing a loan and choose the one with the best outcome and service.
Mortgage brokers usually have great advice and can obtain quotes from many lenders. A bank is locked into what they offer only, and it may not be the best.
A good mortgage broker will bring up questions that you hadn’t thought about too.
I don’t think you have to take a high interest rate being a new homeowner. You should get something solid through a broker. They will also run you through LMI and deposits. You may be able to get a loan earlier than you think.
Back in October when we got my first mortgage, we had initially planned to save for 18 more months to get a 20% deposit and worried we could not out save the rising home prices. (We actually couldn’t)
Our broker provided a 90% Loan option and the LMI cost for this and it worked out to be easily better than saving for 20% to avoid LMI. Especially when house prices may go up $60/70k in 18 months in our location. The $18k LMI was worth just paying.
In hindsight this was a perfect decision - based on 3 sales recently down our street, our probable value is up $55k in 3 months or so. This is literally my partners salary made in 3 months. About $11k (20% of $55k) we would have had to out save. Not possible for us.
Another side note. If you plan on getting a home, start saving and spending like you have a mortgage now. Tune up your bank accounts to look good NOW even if you are a year away from pulling the trigger. Think of it as A Spending Resume/CV and thew bank is wanting to employ you to get a mortgage.
Rent vesting until retirement is not always a bad idea. I’m 32 and might be able to afford a place when I’m 35. I Wanted to know, “what’s the difference between rent-vesting until I retire vs buying a house at 35”. The answer, maybe not that much by the time I get to 61.
[Here’s the spreadsheet](https://docs.google.com/spreadsheets/d/1HRzzs3pjwHJZcETYUkbrj_Y6ERwVJ122y3fCXPb7j2Y/edit) if you want to check my maths.
So some assumptions; there’s no adjustments for inflation or wage growth, no other on going maintenance costs for property.
Scenario 1: investing 40K per year assuming a 6% growth rate. Net wealth by age of 61; $4,971K
Scenario 2: Use 50K from super under FHSSS and 100K from investments as a deposit to buy a 2 bedroom apartment for 650K (mortgage of 550K, with up to 50K for stamp duty and other initial costs), get a house mate to incease savings, invest 20K a year and pay 29K per year off mortgage, assuming interest rate of 2.4% and apartment value increase by 4% per year. Net wealth by age of 61; $4,959K
Some people have brought up CGT differences. One way to work around this in scenario 1 is to use a lump sum from super to buy a place, and transfer assets from investment to super over a long-ish time frame (maybe from 55 to 70).
I’m pro renting, so colour me biased. Renting gives me the most flexibility in life. I can live in a nice suburb for a fraction of the price to buy. I can also more easily move to take on more interesting work.
I've been looking at something similar and posted my model here:
Although mine does not consider investing the difference between renting and buying.
I think in your model the net wealth should be the same at day 0 because you have the deposit tied up in the property but you still have that as equity as part of your net wealth. Over time, your equity increases through the growth of property (hopefully) and the principal components of your loan repayment (guaranteed). It also should consider the "cost" of rent for a PPOR scenario. The 50k for setup costs seems pretty high as well, stamp duty, conveyancing, and mortgage setup is not that much.
Yeah, good pick up.
it’s not really a spare 50K either. It’s more like a 42K withdrawal from super because of taxes.
I also don’t deduct the 15% tax going into super. So it’s quite a flawed model but I enjoyed building out the first iteration of it.
Mate it’s hard to do but if you’re disciplined and your save more as your income grows you will get there.
Depends what you want, I got a little unit for myself at 22. Plenty big enough for me while working part time at a fast food restaurant. 90k you'll do it no problem 😅
Yolo into penny stock, make money, buy lambo then buy house
What worked for us was saving everything over the median household income and 20% of the median.
Psychologicaly it made it way easier to save knowing the way we were living was better than 50% of people out there. Your a single so lets say the median for Sydney is 60k (I cbf) looking it up. That’s 50k after tax or 40k after saving 20%. Now work out how you can live on 40 k , a large % of Australians do so it should be possible and save ~ 29k pa (10k + 19k).
Also you are at the start of your career, if your pulling 90k as a grad I’m assuming you are in tech? If so you can easily be pulling in 150-200k in the next 5 years. If you keep to the same budget I proposed it won’t take you long.
Also prices won’t keep on rising at the same rate indefinitely. At some point they will plateau and they could stay steady for years. We don’t really know when that will happen although likely at the end of this year as a result of interest rate rises. You can’t buy now so try not to look at house prices, keep on saving and you will get there or at worst you will have a stack of cash/shares.
Finally talk to a broker sooner rather than later. Depending where we are in the cycle it can be worth buying at a higher lvr.
This is definitely something to take into account - if you nurture your career in those early years, your salary growth can be substantial. Do that and invest, and what seems unaffordable now will feel comfortably in reach in a few years
Thank you so much for this! I was worried that jumping late into the property market meant constantly having to chase a higher deposit over time. I hope it plateaus! Noticed a ton of people buying houses during Covid which made me wonder if I wasn’t doing something right in terms of saving etc. I’m working in health for a private practice! Hoping to push for a higher salary this coming September hopefully ! I definitely agree with avoiding the tendency to look at house prices and getting demotivated for sure!
I bought apartment, as house was unreachable. Salary was 87k. Then built up equity for 5-6 years, wage increased to 130k, bought a house now, but fully leveraged, loan to income ratio is 7x now.
You are right that house prices are raising faster than average wages, but as a fresh grad your wages should be increasing even faster yet (eg, my wages have increased by 50% in the past 2 years). Either way, you are making plenty of money to afford a house, just need to get a saving plan in place and you'll get there. Don't let your lifestyle catch up to your income, it's easier to prevent that from happening than to go back on it.
I saved $45k 4 years ago and brought rurally, put tenants in and two things have happened.They've paid the mortgage down (equity), price of the hose went up (more equity).
Now i'm still not in a position to buy in melbourne, i have to move ruraly to be able live in a house that i own (i'm on 100k a year, pre--approved for 500ish) But i'm sick of renting and i've been wfh for the last 3 years so, thats it. I'm out. Melbourne fucking sucks and Im over renting at 35.
BUT if i buy @ $500k i'll be paying off 800k worth of property i can start to evaluate and see where and what i want to do in the future
When I was 25, I was earning ok money at $45K ish but with ALOT of overtime and just saving like mad (thanks to living rent free with parents). I managed to get an (at the time) over priced unit. Eventually keep upgrading, building equity and relying on said equity to get into my own home.
At least you have a goal to aim for.
Move away from capital cities. I was married and in an affluent area and had to move 1.5 hours from the city to buy. It’s going to be further away now but it’s about sacrifice unfortunately
Why do you need to buy a house?
For inspiration, what do you do for work?
You may not need as much money down as you think. FHA loans are available with as little as 3.5% down plus closing costs. Home builders often provide closing cost assistance that can cover a portion of your closing costs.
The FHA Chenoa loan is an attractive option if you don't have significant savings. With that program, the primary lender provides a 96.5% first mortgage, and Cheona steps in and funds up to 5% as a second mortgage. The 2nd has very low payments and if your income is low enough, it's forgiven after 3 years of on-time payments of the first mortgage. The interest rate and fees for this loan are higher but it gets the job done.
I thought these guys were in the US, not Aus, or am I wrong?
Yeah there’s a few US peeps that seem to post their US tips in here…. They don’t realise it’s Australian I guess???!!!