Browse Forums Home Finance 1 Apr 24, 2009 9:16 am Hi, I am after some advice about getting a home loan for first home buyer. Have been umming and aahhing about this for awhile, as I don't think we would fit a criteria to be able to buy but have been advised to check it out. So this is our situation: My husband works fulltime (generally around $613 per week after tax, sometimes he gets overtime) and I am on family benefit ( $280 per week)as we have two children aged 8 months and 2 years. Between us we have $9,500 in credit card debt (we are just putting $50 weekly into these at the moment and not spending on them) and do not have savings as such (although we do have nearly $1500 that has been put aside over time but this is specifically for car related expenses, maintenance etc). We are paying $300 per week in rent and have always been up to date with this. My husband has a squeaky clean credit record and I have a few overdrawns on my credit card but that is all (not sure if this will hurt our case!) My mum has said that if need be that her and her husband will go guarantor if we have problems which was nice of her, but if possible, we would like to do this under our own steam and not have to involve others. We would be looking at under $300,000 (we have already been looking at the market and there are quite a few houses that would suit us. We are near Bribie Island, Qld in case anyone is wondering our location). When I calculated on the realestate.com.au borrowing calculator - it came up that on a 250,000 loan we would be paying back approx $367 per week (this is based on principal + interest) over a 25 year period based on 5.74% interest rate. We could afford this as we are already paying most of it in rent already. Judging from what I have just laid out - do you think that we would be able to have a chance in getting a home loan? I don't want to go into a bank and get laughed at because we don't meet any criteria, but I have heard that the first home buyers grant is expiring end of June 09 so I am beginning to panic. Our lease is up on this house in July this year, so it would work out if we were to buy. I have been looking at going back to work but of late have been considering this as not being so helpful. Because of child care costs, I would only really be able to work part time hours anyway, which would be around the $350 mark after tax (per week) but then take childcare out (which is around $160 per week for 3 days) and I would be left with less money than what I am getting now from family benefit. If I went back to work full time, we would not be entitled to any child care benefits and we would then have to pay the full fee of approx $60 a day per child which would work out phenomonal for 5 days. Any advice is appreciated please. Jay Sorry for the long ramble! Re: Please have a look at our situation and give us some advice 2Apr 24, 2009 9:23 am I'm certainly no expert when it comes to financial matters so feel free ignore what I say. But if I was you, I would be paying off that CC debt ASAP before taking on another debt. Re: Please have a look at our situation and give us some advice 3Apr 24, 2009 9:26 am D@n offers good advice however the main issue is no savings. From what has been said here recently there are next to no banks now offering 100% loans. So you would need possibly to have at least 5% genuine savings - that is saved over at least a 6mth period with statements to confirm that. Some things are worth waiting for. Re: Please have a look at our situation and give us some advice 4Apr 24, 2009 9:31 am You would really need to either speak to the bank or a broker. Will you be borrowing 100%, most banks are really cutting down on these from the sounds of things simply because of the current economic climate. I personally wouldn't make any major decisions based on the FHOG bonus running out June 30. To buy existing, you are only getting an extra say, $7-10k from the bonus as it will revert back to the original grant. I know I say only, but I've heard around the traps the first home buyers market has gone up by as much as $30k because of the extra bonus, so you get $7k from the government but you are paying $30k more... When banks calc your debts, they don't just calc what you owe on the c card. They take it as though the credit limit is what you owe, so be wary of that. Also, you must look at interest rates, sure, you can afford them at current levels, but do your calcs based on a much higher interest rate - only a year ago they were 9% or more so you don't want to get caught out when they go up as they definitely will go up and down over the course of the loan. I hope I've been some help, good luck with your decision!! ICK So glad the building is over, never again. Loooove our house, but still not quite sure it was worth all of the stress they put us through! Re: Please have a look at our situation and give us some advice 5Apr 24, 2009 9:44 am jac&aar When I calculated on the realestate.com.au borrowing calculator - it came up that on a 250,000 loan we would be paying back approx $367 per week (this is based on principal + interest) over a 25 year period based on 5.74% interest rate. We could afford this as we are already paying most of it in rent already. Firstly I just used Suncorp's calculator based on $250 000 at 5.74% over 25 years and get $392 a week? You can probably take the loan over 30 years which would bring it down a bit though. Secondly, what if interest rates go up to 10% - can you afford it then? Even if you fix for 5 years now, what if rates are much higher when you come off fixed? What if your husband lost his job? Sorry to sound all negative but I think it's best to work out what you can afford in the worst case senario. I'm not saying you should be in the perfect situation prior to buying a house (I certainly wasn't), and sometimes it's good to take the leap and get your foot in the door, however you don't want to be biting off more than you can chew. As others have said, 100% loans are no more so you would have to have at least 5% of the value of the house saved ($12500) plus money for things like mortgage insurance (compulsory for the % you'd be borrowing) and conveyancing etc (although you may be able to use the FHOG for this). Don't panic about missing this $21k - there is a school of thought which says it basically pushes the prices of homes in the first home buyer market up by this value anyway! Best of luck with your savings Renovating a post-war house in Brisbane | On the first rung of the property ladder Re: Please have a look at our situation and give us some advice 6Apr 24, 2009 10:14 am First step is get rid of the credit cards completely. Take out a personal loan for $9500 so the interest rate is lower. The banks will look much more favourable at this. Re: Please have a look at our situation and give us some advice 7Apr 24, 2009 10:25 am My first two thoughts have been said but again, don't let the $21k influence you too much, and the interest rate will go back up..... Yes it's tough if you are a single income with kids family, we are and it does rather reduce your options. If I were you I would try and get rid of that cc debt too, and get myself into a good starting position before taking the leap. Re: Please have a look at our situation and give us some advice 8Apr 24, 2009 10:31 am It might be ok, firstly, as u said, yr youngest is 8 months, if u fix on a good interest rate for 5yrs, then u might take up some work as well when both yr kids are in school, this is what i plan on doing, can u borrow the deposit from a relative? i understand it is hard to save when renting, but u can pay yr rent, i don't see why u can't pay a mortgage off, but, yes work on a rate of 12% is what i would do. I also have one credit card with a 7k limit and nothing owing on it, so i will get rid of that so i have more borrowing power. I wouldn't worry about missing out on grant as home prices are getting quite low. Good luck! Re: Please have a look at our situation and give us some advice 9Apr 24, 2009 10:49 am Ill just add one thing... Paying $50 a week off your CC will take about 5 years to pay it off, maybe longer. If it had 0% interest forever it would still take 3 1/2 years... Re: Please have a look at our situation and give us some advice 10Apr 24, 2009 10:57 am jac&aar When I calculated on the realestate.com.au borrowing calculator - it came up that on a 250,000 loan we would be paying back approx $367 per week (this is based on principal + interest) over a 25 year period based on 5.74% interest rate. We could afford this as we are already paying most of it in rent already. Dont forget to factor in the cost of Council Rates (another couple of hundred $$ per month), water and other costs associated with home ownership that you don't have to deal with when renting. I concurr with everything else said above about inevitable rate rises, substancial deposits and a proven savings history. Its a tough business affording a home but it would be much tougher loosing one. Best of Luck, I hope it works out for you! Re: Please have a look at our situation and give us some advice 11Apr 24, 2009 11:27 am Yeah I nearly died of shock when I got our first yearly water rate (or whatever it's called) bill of $500 in the post..I had factored in council rates, insurance and the rest but didn't know about this one.... Re: Please have a look at our situation and give us some advice 12Apr 24, 2009 12:39 pm Thanks for all your replys so far - they have been QUICK! You have all confirmed my original assessment of our financial situation - I guess I was hoping for a miracle as I am really over renting and paying dead money...plus the first home buyers grant played a big factor in my wanting to do it before June as well. It is a good idea about taking a personal loan out to cover credit cards - to be honest I had not thought of this. Will talk to my husband about it and see what he thinks. Makes sense to me! I rang Mortgage Choice just before given your advice. Will hear back from them this afternoon as to verdict. They also confirmed that most banks are tightening their hold up on the 100% lending so I am very doubtful anything will come of it. Even though I am itching to get in there, I suppose I will just have to be patient and try to start putting money aside. Very hard to do that at the moment, it would probably be less than a hundred we can put away a week. This is also why I started putting 50 into each of our credit cards a week...just so there was some regular payment scheme happening there....and I knew that we could consistently put 100 in there a week. Previously, we had tried to do too much and then we didn't have the money to put in there - nothing was put in for awhile which I wanted to avoid happening as it is eaten up by interest again. Personal loan to cover this is definitely looking good! I have heard about a Government First Home Buyers Saving Account which you can start up and the government contribute to the fund as well, but it has to be for a term of 4 years before you can withdraw money which means it would be 4 years before we could buy......we do not want to wait that long if we can help it. Thanks again for all of your advice on this matter!! Re: Please have a look at our situation and give us some advice 13Apr 24, 2009 12:47 pm jac&aar Thanks for all your replys so far - they have been QUICK! I have heard about a Government First Home Buyers Saving Account which you can start up and the government contribute to the fund as well, but it has to be for a term of 4 years before you can withdraw money which means it would be 4 years before we could buy......we do not want to wait that long if we can help it. Thanks again for all of your advice on this matter!! Look into the scheme still. 4 years is really not that long and it will probably take you that long to get the credit card under control and the savings for a deposit together anyway. If it was me I would be putting all the savings money on the credit card to avoid interest at the moment. If the car breaks down you can always "redraw" that money by putting the repairs on the credit card. Re: Please have a look at our situation and give us some advice 15Apr 24, 2009 1:08 pm Yeah I've been wondering if we should do that, we only have just under 3 grand on one card but are finding it hard to make much of a dent in it at the moment. Actually I might start a thread on the topic later.. Re: Please have a look at our situation and give us some advice 16Apr 24, 2009 2:04 pm jac&aar ...plus the first home buyers grant played a big factor in my wanting to do it before June as well. Mr Krudd is just trying to get people to rush to take it up. It is a standard tactic. Tell people it is to end and they rush to utilise it, then you announce later that you will continue it or even improve it. jac&aar I rang Mortgage Choice just before given your advice. Will hear back from them this afternoon as to verdict. They also confirmed that most banks are tightening their hold up on the 100% lending so I am very doubtful anything will come of it. MC has a vested financial intrest in you taking up this loan option. They will not give a fig when you are in financal strife and about to lose everything you own and still be left with a large debt. They will still get their money and they will do everything to convince you that they have your best intrests at heart and would never give you a loan that may turn bad for you. Trust me, they will be as nice as pie. jac&aar I have heard about a Government First Home Buyers Saving Account which you can start up and the government contribute to the fund as well, but it has to be for a term of 4 years before you can withdraw money which means it would be 4 years before we could buy......we do not want to wait that long if we can help it. This is a good idea to follow. It will get you into a savings mode that you will need once you have a new house - your mortgage is going to be more than your rent. It will also mean that the market may have dropped and dropped significantly so you will be in a position to buy a bargain rather than at the top of the market. I understand your sense that you just want a place of your own. Unfortunately your financial position puts you in a high risk category and so you need to be a bit extra cautious. Certainly you can take the chance but you really do have a high probability of getting burnt. Here are some things to consider (as mentioned above): credit card intrest rate rising to 29.9% (already happened to some in the US - went from 4.9% to 29.9%) loan intrest rate rising from 5.74% to 12% or more rates $100 - $200 per month water/sewerage bills repairs and maintenance building insurance pest control costs One off costs: stamp duty conveyancing fees survey fees engineers report council application fees etc etc To consider: Are house prices going up or down? If prices fall 20 - 50% how unhappy will you feel? If you default and are left with a $50 000 bill to pay off how will it impact you? If your husband loses his job how will you cope? centrelink pays towards your rent, they do not pay towards your mortgage What is your husband becomes ill/injured and is unable to work? (similar to above but cannot work even if available) What if you get a large unexpected expense, will you choose your mortgage or the expense? What savings have you got to dip into if you really need to? Do you like gambling. Put your familys intrests ahead of your impulse. Be careful, be VERY careful!!! Re: Please have a look at our situation and give us some advice 17Apr 24, 2009 2:16 pm Rent money doesnt have to be dead money!!!!! Some wealthy people will tell you that owning a house is "dead money". Dead money because you have all this money in one assest just sitting there. Yes i agree over the long term it increase in value. However even cans of bake beans increase invalue and i dotn see rich people stocking up on bakebeans. You mentioned above that you currently pay around 300 a week in rent. But would be happy to pay 360 a week off in a house loan. So the quesiton is i ask why dont you get that extra $60 and place it on your credit card. Secondly if you dont want to do that, why dont you find something else to invest?? It doesnt have to be property. Aim for a five year plan. Somethign as simple as a manged find may be good value now as the unit prices have all fallen. Maybe in five year they will increase enough for you to sell and have a good deposit on a house. Re: Please have a look at our situation and give us some advice 18Apr 24, 2009 3:40 pm If you are paying $300 p/w in rent and can only manage to save $100 p/w then honestly, I don't like your chances of being able to personally afford the mortgage you mentioned. The banks use a certain dollar figure that people need to live off, but trust me it is NO WHERE NEAR what I need to cover my regular bills (other than rent). Your CC debt might not actually stop you getting the loan, but the lower income that you live from may. If you really want to get out of the rental market, I would speak to a financial advisor or someone to help you draw up a really good budget that you can stick to so that you can get an action plan happening to achieve your dream of owning a house. While it would be great to be able to get the FHOB, it's not worth it in the long term if your mortgage will end up crippling you financially. 'A bottle of wine contains more philosophy than all the books in the world.' Louis Pasteur Vegie garden: viewtopic.php?f=19&t=27637&start=0 My Backyard Adventure You might be able to apply to divert the sewer at your expense. In NSW you would contact a Water services co-ordinator and they would give you advice as to whether or not… 1 16150 No the fireplace doesn’t work. It’s been enclosed. I’m not sure what was removed, as it was done quite some time ago - well before what I can see with photos online… 2 11589 Versaloc is a mortarless besser block system that still needs a properly engineered footing. If you just do a 400x200 footing it will fail in time. At 17m long you need it… 1 18169 |