Browse Forums General Discussion 1 May 06, 2010 1:24 pm Hi All, After pondering for dayssss on our land purchase there are few questions that come to mind. That I hope give anyone out there with the same thoughts..... some enlightment. Subject of the post Dollars & Sense With rising interest rates and all the commotion of future generations unable to afford housing in NSW or perhaps other states. The Great australian dream of owning your home might end up just being a dream... So people who do build would obviously do so if it is in their budget or comfort zone.. However reading and hearing the news "First Home Buyers" are facing "mortgage stress" which is essentially where your monthly repayments are more then 30% of your total income per month. 1)Which brings the question of How much interest does one ideally calculate in working out their comfort zone to afford YOUR HOME! without taking extra work commitments.? 10% 12%? It seems that even a single storey small house in sydney these days are selling like hotcakes! and at prices which seriously in a nice good suburb, relatively new home is hard to afford! 2)When choosing your house design/ floor plan, facade, roof etc. did you consider the resale value? The questions are simple.. however hope their is some discussion on the broader issue of housing affordability. And when to draw the line as to how much you should borrow versus how much you are comfortable in repaying. It does seem though house prices are rising because people just keep paying for the higher prices... even with high interest rates.. so no bubble to pop here ... perhaps with all the hype of owning a house in sydney is so hard bla bla .. perhaps people are just prepared to pay anything because they believe the value of their precious purchases are going to bring them riches in the long term? Cheers. http://dreamzattheponds.blogspot.com To be invited to our blog send a PM with your email. Settled on land 25th June Exchanged contracts on Land April 14th 2010 Building our First Home Re: Dollars and Sense! 2May 06, 2010 1:32 pm Before kids I was a lending manager for one of the Big4 - from 2001 until 2005. Even at this time I saw people who got in way over their heads - and this was when interest rates were still quite low and house values relatively low as well. There will always be some people who will get caught up in the hype and spend way too much money on a house that they in the end cannot afford. Then there will always be people who work out their budget carefully and not get into any difficulty. For our case we owned outright our home prior to having children so me leaving work was not any imposition on our budget. As well as that my DH has a successful business which means we are able to invest in property as well as our business. When we built our home we were able to do so without too many restrictions - but again always erring on the side of financial caution (we tend to always budget on 12-13% interest rates as that was what the rates were when we originally bought our first homes). To the other question - no we have never once taken into account resale value. Only because in our case this home will never be sold by us - it is our family home until we are infirm and unable to take care of ourselves. Some things are worth waiting for. Re: Dollars and Sense! 4May 06, 2010 4:01 pm The mortgage stress survey is a load of crap. I took the survey and it said that i was under mortgage stress as i had cut back on discretionary spending. Im not under any mortgae stress at all. If you hear things in the media, its best to check out whats really behind yje definitions Re: Dollars and Sense! 5May 07, 2010 12:41 pm Kyton and VLT totally agree. 15-17% interest yes I have heard about that occuring back in the days.. With regards to mortgage stress it does occur.. perhaps their could be better surveys out their to measure the this. If you compare nsw with other states.. to live in at least 1 hours drive from the cbd it still is "Unaffordable" for most people.. especially for GEN Y's.. hmmmm.. there should be more stimulus packages i think 7k is immaterial compared to the amount it actually costs to buy a home and a decent one for a nice price..... Best thing is to just save I guess for anyone out their really wanting to own your own home. But then that is also tough. Well all the best any strategies on minimising mortages or ideas do comment. It could be useful for all. http://dreamzattheponds.blogspot.com To be invited to our blog send a PM with your email. Settled on land 25th June Exchanged contracts on Land April 14th 2010 Building our First Home Re: Dollars and Sense! 6May 07, 2010 1:17 pm Mortgage stress I believe occurs when people want to get into their dream home as their first home, stretch to the limit so they can make the dream come true until interest rates go up like they are now, then the rubberband snaps. I'm a Gen X and was taught to live within my means and started in property with a modest small apartment. You then grow your equity by capital gains and saving money while in the modest apartment and with the hope your salary will also grow over time. Equity needs time to grow and will not happen overnight, the dream house will come if you are sensible with your spending, the key is to get into the market by starting small, then grow and upgrade over time. Although we won't consider selling our home (currently being built) anytime soon, it's growth and resale potential was also a deciding factor. However, I feel it is the land value that is appreciating the fastest and not the house, so the extra bits you put in the house may increase the resale value but the location ultimately is the key driver of growth. my 2c Re: Dollars and Sense! 7May 07, 2010 1:28 pm When we looked at building the first time we did all the numbers and it didn't sit right with me so we didn't go ahead with it. This time, we worked out our repayments up to about 11% and on one income only as I wasn't working at the time. The first time I was so stressed about money I knew it wasn't the right time. This time I'm not so stressed...well not about the finance side of things anyway lol. As for resale, like someone else said...this is our forever home. We've chosen a house that will serve us looooong into the future. I'll deal with resale value in 30 years when we sell up and buy a winnebago to travel around Australia in. I should add, I am married to an accountant so obviously it's unlikely we're going to allow ourselves to get too far in the poop. I still get queried about $20 purchases from Big W lol. Re: Dollars and Sense! 8May 07, 2010 1:44 pm We're going to build our first home. We thought building a small home would be better than buying a small apartment or unit. Reasons are: - The prices of units are not that cheap. We had a look around and they're sitting at around 270-300 in the areas we looked. They were old and shabby and really small, not worth the asking price if you ask me. - A small apartment would not be practical in the long run. I am 25 and my BF is 28, and we plan on getting married and having kids within 3 years time. A small apartment would not be a smart choice if we have children as we'll need to upgrade to a house before we can even own the apartment. Besides, I don't like the idea of living in the same building as other people and hearing everything they do when they're home. AND by the time we have to buy a house the prices would have gone up so much that we'll be in the same position as we are in now, or even worse - who knows. - We were allowed to borrow up to $380, but were not willing to do so. We want to live comfortable and save a lot of money and pay more of the mortgage than what we have to. So we chose a block of land that we could afford and was in a good location - off Leakes Road and close to the freeway. Price was $160,000, cheaper than land in other areas we looked at, a good size, and in a court. The house we are building is $150,000, it's small and cosy, a good size for a growing family, and not "over the top", so to speak. It would last us a long time if we choose to have just 2 kids. And we're not going crazy on luxury items such as stone benchtops and the like. So once we pay our deposit and receive the FHOG, we'll have a loan of less than $300,000 - maybe more towards $280-290,000. So, long story short, we chose to build a house because it seems like a better investment for our future. We want our own space and want to live together, and don't want to live with our parents forever. We don't want to start renting because we'll never get out of that cycle. And we don't want to be pushed to our limits by building an overly expensive home. We allowed for interest rate rises so we can cope with the mortgage stress, and hope to still pay more than the minimum even if they do keep rising. Re: Dollars and Sense! 9May 08, 2010 5:10 pm This will be our second home - first build. We considered interest rates around the 11-12% and worked out that on what we are borrowing this would just reach the 30% of our combined income if interest rates were to reach these heights. I bought the unit we are in when i was 20 and went with out a lot when all of my friends were going out I was paying my mortgage, DH moved in not long after - we spent a little bit of money on it (8% of the original purchase price) but have come out of it (after selling) with a profit of 69% in just 5 years - needless to say the mortgage is paid off, the 2 car loans paid out and we left with around $65k deposit for our house and land (not including our current savings)... so whilst the mortgage will be double the size of what we are used to... we will have our "forever" house which is three times the size than our current place... and a decent amount of equity already invested in it - it definitely pays to start small and work your way up the ladder. I totally agree that the mistake a lot of first home buyers are making is that they want what their parents of 55-65 years of age have, now when they are 25 - which can be out of reach for so many as they do not have the equity that their parents have built up over the past 30 odd years of their lives. Unfortunately this is where many people get in trouble and suffer mortgage stress. Whilst mortgage stress may be a vague term... to me (someone of 25 years of age) If I can't afford luxury items such as Foxtel, Cable internet, dinner out twice a week, buying a top I like at the shops etc... then that is mortgage stress. I still want the freedom but with the house that I want... and some people can under estimate that to be in a "comfortable" situation can take time and hard work... (that's my opinion on dollars and sense!!!) Sleven Moved into our Atlantique MkII 36 by Carlisle Homes Re: Dollars and Sense! 11May 08, 2010 9:39 pm sleven Whilst mortgage stress may be a vague term... to me (someone of 25 years of age) If I can't afford luxury items such as Foxtel, Cable internet, dinner out twice a week, buying a top I like at the shops etc... then that is mortgage stress. I still want the freedom but with the house that I want... and some people can under estimate that to be in a "comfortable" situation can take time and hard work... (that's my opinion on dollars and sense!!!) I guess that shows how it's all relative though hey! Cause none of that stuff interests me at all, so not having that stuff to me wouldn't indicate mortgage stress at all. We'd be lucky to eat out 2 or 3 times a year, don't have foxtel etc...if we did do that we probably wouldn't be able to afford the house we're buying...but we don't want that stuff so it doesn't matter. Very interesting. Re: Dollars and Sense! 12May 09, 2010 6:33 pm I wonder how they figured out the 30% as an indicator of mortgage stress.. perhaps on surveys... as someone said above.. it depends on peoples needs and wants.. in a way. http://dreamzattheponds.blogspot.com To be invited to our blog send a PM with your email. Settled on land 25th June Exchanged contracts on Land April 14th 2010 Building our First Home Re: Dollars and Sense! 13May 10, 2010 12:19 pm we are a young married couple - both working professionals(engineers)...were told we could borrow upto $500K...we laughed that bing FHB we were even allowed to borrow that much...we are borrowing no where near that much and we only got a loan for land + building Basic price...all our prestart items will be from our own pockets because most of our prestart items are nice to haves...out builder has great inclusions and so we dont need to add any "basic" essentials at prestarts...we decided we wont get a loan for "nice to haves" - so what we cant afford, we wont have! We have some friends who are building amazing houses with huge mortgages for their first home and we just dont get it...we want to have a nice house- but more importantly, we still want to have a life!!!!!! hehe We still love our overseas holidays and eating out once a week habits.... My dad always said, if a house doesnt fit into your current lifestyle, then you are not ready for that house yet(assuming, lifestyle and house price are sensible ofcourse)....we live by that - so we only decided to buy when we were ready and only buying what we can payback! We are finding building a house extremely rewarding - almost like watching a baby grow - but having financial stress would just ruin it and you'd end up detesting the house you've built.. ohwell that my 2c worth!!! Building with Celebration homes SOR Perth [color=#BF00BF] Re: Dollars and Sense! 14May 10, 2010 11:18 pm dreamz 1)Which brings the question of How much interest does one ideally calculate in working out their comfort zone to afford YOUR HOME! without taking extra work commitments.? 10% 12%? It seems that even a single storey small house in sydney these days are selling like hotcakes! and at prices which seriously in a nice good suburb, relatively new home is hard to afford! 2)When choosing your house design/ floor plan, facade, roof etc. did you consider the resale value? Hi dreamz, 1) I think 10% to 12% is quite sensible. At those interest rates, inflation would be quite high and you would more or less expect your wage increases to keep pace. What banks say people can borrow tends to be very unrealistic, particularly for dual income families. If you can, aim to pay off an extra 50% of your mortgage repayment per month. The lower your principal is, the less you will worry about interest rates. 2) Yes and no. If we were doing it strictly for investment, we would have made lots of different decisions. Overall, the things we added for lifestyle have cost more money. However, if it means we live at this house a little longer, and enjoy our time there more, I'm not concerned at all. Re: Dollars and Sense! 15May 11, 2010 10:04 pm The answers to your questions, dreamz, are so variable. We are lucky enough to have a comparitively small loan because we had so much equity in our old place and land is cheap here. But that's not to say I don't feel mortgage stress, it's just that I don't feel it in a monetary sense. It is the realisation that we still won't have it paid for for a certain amount of years, which prevents us from any sort of major investing (or spending on o'seas holidays. We are mid 40's and feel the need to explore). But yes, you simply must assume that interest rates can top 10%. Pay more than the minimum, but don't redraw for feelgood stuff. Your home will look after itself when the time comes to sell, and what you get for it is what you deserve. Resale value, in my opinion, is normally not an issue unless you totally stuff up the design of your house - making it too individualistic with coloured symmetrical patterns in your brickwork for example, neglecting to have an ensuite in a new home, or poor orientation if building on a corner block where the driveway backs onto a roundabout. Your home will always sell as long as demand is healthy, the colours are neutral or matching and the design is not awkward. For us, building was a lifestyle choice, but the risk was building in a region dependant on a carbon-consuming heavy secondary-industry. We will never enjoy the capital gains experienced in metro areas, but gee we live in a great house compared to most people around here. Don't be too hung up on the doomsayers view that the great Aussie dream is all over. So-called experts have been saying that for decades. If you truly want to be a homeowner, you will make it happen, as long as you are prepared. Geoff - Decophile. Re: Dollars and Sense! 16May 11, 2010 10:14 pm I get a bit miffed at the whole mortgage stress when there is the FHOG-we have built our houses in the past 20 years with NO assistance whatsoever-and we had children without baby bonuses or childcare rebates! And when we built our first 11sq house interest rates were 17%-we sacrificed a lot of outings and entertained at home and didn't have holidays until the eldest was 16 (other than visiting family members)...I know that I sound like a grumpy old person (and at nearly 42 maybe rightfully so to some!)-but honestly, if you can't build a decent first home with what's available these days without "mortgage stress" then there is seriously something wrong! Deemaree Kyndylan Capers: viewtopic.php?f=36&t=46852 My blog: http://www.sufficientlysufficient.blogspot.com/ Re: Dollars and Sense! 17May 12, 2010 12:09 am Deemaree I get a bit miffed at the whole mortgage stress when there is the FHOG-we have built our houses in the past 20 years with NO assistance whatsoever-and we had children without baby bonuses or childcare rebates! And when we built our first 11sq house interest rates were 17%-we sacrificed a lot of outings and entertained at home and didn't have holidays until the eldest was 16 (other than visiting family members)...I know that I sound like a grumpy old person (and at nearly 42 maybe rightfully so to some!)-but honestly, if you can't build a decent first home with what's available these days without "mortgage stress" then there is seriously something wrong! But back then in the mid 80's an average house in Melb was approx $45k and the average wage was approx $20k. Fast forward to today where the average house is approx $500k yet the average wage is approx $60k. Yeah interest rates are lower etc, but back when you entered the market the house was maybe 2 - 3 times your wage, stamp duty was neglible and saving a deposit wasn't equivilent to a years wages untaxed. Now people are faced with a house that is 9 times the average wage, stamp duty in the 10 of thousands and deposits of up to $30,000 or more. Re: Dollars and Sense! 18May 12, 2010 7:48 am Huggy_B, Our first house & land package in 1992 (in Carrum Downs) was $85K, our annual salary at the time was $18K......it did require a then large deposit of a minimum of 10% (oh, and we lost money when we sold thehouse due to building in the boom and selling in the downturn)! This house we are building is $350K house & land and our combined salary is around $85-$90K...not much has changed-except the lifestyle expectations......I agree about the stamp duty though. BTW-the mid 80's I was in my mid teens But that's another thread! Deemaree Kyndylan Capers: viewtopic.php?f=36&t=46852 My blog: http://www.sufficientlysufficient.blogspot.com/ Re: Dollars and Sense! 19May 12, 2010 12:47 pm Hmm i do agree though.. no matter which generation you built your home for the first time im sure each persons situation was perhaps similar to a 25 yr old today trying to get into the market.. http://dreamzattheponds.blogspot.com To be invited to our blog send a PM with your email. Settled on land 25th June Exchanged contracts on Land April 14th 2010 Building our First Home Re: Dollars and Sense! 20May 13, 2010 6:15 pm One of the nicest advice i've been told personally in a long time! "Don't Build your home until you know exactly what you want... after all it's on of the biggest decisions one can make involving alot of $$$ and you don't want to get that wrong" http://dreamzattheponds.blogspot.com To be invited to our blog send a PM with your email. Settled on land 25th June Exchanged contracts on Land April 14th 2010 Building our First Home if i have understood your dimensions correctly my suggestions include using the smallest toilet and wall hung handbasin eg Caroma Urbane with in wall cistern, small wall… 1 8167 I recently went through a similar renovation and move scenario when updating our family home. We also swapped some rooms around and tackled a major… 2 10031 Unless the room is for storage then it's non compliant BCA V2 2019 S3 P3.8 You have 2 options 1. The builder deconstructs the section and rebuilds as per plan /… 7 10682 |