Should I buy a house?

I'm living in Australia, single, eligible for citizenship on July 9th, stable employment.

i applied for and have been told I can expect to be accepted for a mortgage on Monday on place I have picked but now I'm scared it's not the right thing to do and may be better off just renting long term.

My rent is currently $290 a week. My take home pay is usually around $3000 a fortnight, sometimes bit more sometimes bit less, this will increase the longer I work. My mortgage would be roughly just under $450 a week but on top of that I would have added extras I don't pay now as I'm renting. The government are giving me $20000 towards it which I thought I should take advantage of but now I'm not sure.

No one in my life has any logical advise for me, the people I would trust to ask say the live too far away to know and just offer up pros and cons of both.

Anyone have any experience of same or can offer any insight....I just don't know what to do lol it's such a massive long term commitment and is the repayments too high for my income?

Thanks

Do you want the freedom to paint it hot pink and bash walls through or the lower price? no doubt, renting is cheaper, and if you invest the difference between renting and owning long term you will be better off (according to internet gurus at least).

 

However, renting means you will never have security long term as you don't know whether the landlord is going to sell, or drop dead, or anything like that. By buying and building up equity you also have the option of offsetting against investments yourself later down the track.

 

It's something only you can answer ultimately. Yes, it is a big commitment but don't over-commit yourself and get a place where you can make more than minimum repayments with ease and then it's not a huge worry.

I agree with Eera ... regarding the security of owning your own place although with that comes the maintenance etc. If you're not sure then wait awhile, if it's not your dream 'must live there' home then something else will appeal to you along the line.

I'm living in Australia, single, eligible for citizenship on July 9th, stable employment.

i applied for and have been told I can expect to be accepted for a mortgage on Monday on place I have picked but now I'm scared it's not the right thing to do and may be better off just renting long term.

My rent is currently $290 a week. My take home pay is usually around $3000 a fortnight, sometimes bit more sometimes bit less, this will increase the longer I work. My mortgage would be roughly just under $450 a week but on top of that I would have added extras I don't pay now as I'm renting. The government are giving me $20000 towards it which I thought I should take advantage of but now I'm not sure.

No one in my life has any logical advise for me, the people I would trust to ask say the live too far away to know and just offer up pros and cons of both.

Anyone have any experience of same or can offer any insight....I just don't know what to do lol it's such a massive long term commitment and is the repayments too high for my income?

Thanks

 

In your position I would only buy if I was confident of living somewhere long term (and I define that as 10 years). Moving frequently eats money and you are better off renting by far. You will be much poorer if you buy in the short/medium term as you can see from your numbers. Payback comes when you are old. I know people who must work into their 70s in order to pay rent or a mortgage taken out late in life. Now, in our 50s, having no mortgage gives us options. Living in our house would cost us $600 a week renting so even though we have a few extras to pay we are $25-30k per year better off because I decided to buy when younger and made paying off the mortgage a priority.

 

Buying or renting is as much an emotional decision as an economic one which is why it is hard to advise someone.

I'm living in Australia, single, eligible for citizenship on July 9th, stable employment.

i applied for and have been told I can expect to be accepted for a mortgage on Monday on place I have picked but now I'm scared it's not the right thing to do and may be better off just renting long term.

My rent is currently $290 a week. My take home pay is usually around $3000 a fortnight, sometimes bit more sometimes bit less, this will increase the longer I work. My mortgage would be roughly just under $450 a week but on top of that I would have added extras I don't pay now as I'm renting. The government are giving me $20000 towards it which I thought I should take advantage of but now I'm not sure.

No one in my life has any logical advise for me, the people I would trust to ask say the live too far away to know and just offer up pros and cons of both.

Anyone have any experience of same or can offer any insight....I just don't know what to do lol it's such a massive long term commitment and is the repayments too high for my income?

Thanks

long term, buying is a better option than renting, but only you can determine whether you should start. If you are worried, make sure the mortgage gives you the option to rent it out should anything go wrong. As to how prices will go, over the short term, unless it is obvious there is a correction, like Perth, it's a guessing game. Long term, historically, houses have been a good investment.

I'm living in Australia, single, eligible for citizenship on July 9th, stable employment.

i applied for and have been told I can expect to be accepted for a mortgage on Monday on place I have picked but now I'm scared it's not the right thing to do and may be better off just renting long term.

My rent is currently $290 a week. My take home pay is usually around $3000 a fortnight, sometimes bit more sometimes bit less, this will increase the longer I work. My mortgage would be roughly just under $450 a week but on top of that I would have added extras I don't pay now as I'm renting. The government are giving me $20000 towards it which I thought I should take advantage of but now I'm not sure.

No one in my life has any logical advise for me, the people I would trust to ask say the live too far away to know and just offer up pros and cons of both.

Anyone have any experience of same or can offer any insight....I just don't know what to do lol it's such a massive long term commitment and is the repayments too high for my income?

Thanks

 

At the moment your rent is cheaper than your mortgage. What about in 10 years time? Perhaps Mortgage Interest rates will have rocketed so as to keep pace with the rent increases, but what about in 20 years or in 30 years time when your mortgage is fully paid? How much will your rent be then?

 

The one big worry for all home buyers is what if mortgage rates go through the roof and house prices collapse. Unfortunately no one can say for certain that won't happen but it's not likely and you might as well have a policy of not saving for your retirement because you might get hit by a bus before you retire. Plan for the most likely scenario - try to insure against the worst scenario but don't organise your life around that happening.

Yes the mortgage rate could possibly go up over the years (although you can take a descent fixed rate out if you want piece of mind) but rental prices surely will. If you feel settled then settle I'd say. If you stay renting and assuming the rent doesn't increase you will pay €45k out in the next 3 years alone. You are essentially paying someone else's mortgage, why not pay you're own.

As for affordability, anyone's rent / mortgage payments should ideally be under 30% of their household income. Any more than that is classed as potential 'mortgage stress'.

 

The figures you gave are pretty much on the limit of this 30% theory so it is a marginal call. The idea of paying off your own mortgage certainly appeals to me more than paying off someone else's.

One of the big things to consider is retirement planning.

 

The he day you retire your landlord isn't going to say "congratulations you can now live rent free" you will still need to pay rent. But, the vast majority will not have an income that is anywhere close to what we have while working. So, all of a sudden we are much worse off, but with the same outgoings. But having no rent or mortgage eases that a lot.

If you feel you will be medium / long term ( 7 - 10 yrs ) with the property then buying is what I would do.

 

Interest rates won't make any dramatic moves for the next few years.

You say you are secure with work.

You could even rent a room out if this suited you??

 

Only you have a true grasp of the finances involved so just make sure you don't pay too much and hopefully you have factored stamp duty etc into your figures.

Hey. This is our position in the UK: we bought our first house just outside Oxford in 2013, but three years down the line we wanted to try another city. The property had increased in value by 34% by then, so we remortgaged it into a buy-to-let, took some equity out, and used it as a deposit for the current place we're in. We're now considering Australia, so when our fixed rate is up next year, this house will also be a buy-to-let. Effectively, we will own two properties but not have to worry about their mortgages. I strongly believe that property remains a strong investment, and you will only technically be worse off if you sell when in negative equity. Like someone said above, you can always get a tenant in if you're struggling with the mortgage. Second option is a "consent to let". Find out what your chosen mortgage provider's consent to let terms are. In the UK, you can apply for one provided you have lived in the house for at least 6 months. Some mortgage providers charge and extra % on top of your existing rate, whilst some dont. As long as the rent will cover at least 125% of the mortgage you should be ok. Then at least you will have a property if you choose to come back to the house. I believe that if you opt for the Govt grant, you have to own the property for at least 6 months before you can sell. Might be worth checking out if there are any restrictions on letting it out. These are my unqualified personal opinions, but I think it's always good to have options!

 

Just one more thing, you haven't said anything about not having had enough of the state you're living in, so it sounds like subconsciously you have no problems in staying there for a while.

Edited February 4, 2017 by DukeNinja

The other risk to letting out your property is bad tenants. I get you saying its a good investment etc but rent arrears from poor tenants is very much on the increase here. I'm sure for every bad one there's so many more good ones but it's something people often don't consider and I believe they should. You can do every check in the book and still it can go wrong. As I've said, I'm sure the chances are very low but it certainly happens. I actually know of people it's happened to, one person very well. Not nice when you suddenly have best part of a year with no rent, court appearances, escalation to the high court, bailiffs, locksmiths and a complete mess left at the end. Suddenly that great idea is £10/15k down. The chances of recovering the money is not even worth mentioning. If you are going to rent out your property, just consider the bad parts as well as the better parts.

One of the big things to consider is retirement planning.

 

The he day you retire your landlord isn't going to say "congratulations you can now live rent free" you will still need to pay rent. But, the vast majority will not have an income that is anywhere close to what we have while working. So, all of a sudden we are much worse off, but with the same outgoings. But having no rent or mortgage eases that a lot.

 

Absolutely, my dad lives very comfortably on the state pension having paid off his mortgage before he retired over 25 years ago.

 

I'm looking to pay ours off as quickly as we can & certainly by 60 to have the same sort of financial freedom.

 

It also gives you security, imagine renting in your later years and suddenly been given notice to move?

 

Ideally by 40 you would want to be on the housing ladder but the sooner the better if your life if stable.

 

They say to spend no more than a third of your income on housing so the figures you are talking about are reasonable assuming you have no other big debts.

Thank you very much for all the input, has helped and given me some things to think about

Decided to go with buying house, on looking at finer details, the repayments will only be $313 a week, and that's only $23 more than what im paying in rent currently so sounds good. And someone pointed out the 30% thing and those repayments are well under that. Thank you for advice.

Big difference in figures you gave! I would say buy, but I bought young originally so it's ingrained in me! It seems that moving costs are particularly high over here so don't plan to move for a while and that will avoid you eating into your investment savings.