bcworld

I've never seen WDU but from some of the stories people mention on here I think its very guilty of giving people a misleading impression of life in Australia.

Sure the bank may theoretically lend $400k to someone earning $70k. But the P+I repayments (@9%) for such a loan are $3200+ per month with take home earnings of c. $4400 per month.

Once you've paid rates, bills etc etc there is nothing left...does the mortgage advisor consider food optional?

Australia is no different to anywhere else....you should determine how much you can afford to pay every month and then determine what size of loan that equates to allowing for some interest rate increases.

Wendy

Absolutely

Also they don't tell you that they work it out on a loan repayment period of 30 years and not 25

bcworld

My calcs were based on 30....but even if you paid interest only on $400k its still unaffordable on $70k income - $3k interest a month @ 9%.

Even on a 50 year mortgage P+I it would be unaffordable.

Wendy

Yes, I know your calculations were, and yes the figures are VERY scary.

That's why we based our mortgage figures on just a flat wage with no shift allowance, (which my OH then got as a pay rise when he changed to the day shift), overtime or anything else counted in - as you say with $70k income a year, which is approx what we get, we would no way have signed up for that amount - we borrowed $225k and that's just about managable for us.

If/when I go back to work then it will reduce the pressure quite a lot and I may have some spare cash for once in my life.

tictac

Probably a stupid question, but is borrowing $225k with an income of $70k, the same as borrowing $450k with an income of $140k i.e everything is double.? What I mean is, are there any 'gotchas' as your borrowing increases?

Also, I remember once being told that you should split your income 30:30:30 (30% mortgage, 30% bills & living, 30% savings). Do people still live by this rule - particularly people who have moved to Aus in the past few years or so??

Finally, my theory, based on a median house value of $450k, is that if you decide not to 'jump in' now and buy a home while they're just about affordable and choose to save for a larger deposit by renting, then you're never going to be able to afford anything as house prices will rise by more than the amount you'll save by renting. In effect you'll be chasing your tail. Just my $0.02.

spartacus

Haven't read all the posts, but what the banks are willing to lend and what people can afford to pay back are two entirely different things.

The NAB were willing to lend us ridiculous multiples, from memory five times joint income, which was quite remarkable as we'd only been in the country a week and neither myself nor my wife had a job!

We stuck a deposit down on a house and land package within the first fortnight, got jobs the next week and sorted the mortgage out the week after, 2 x joint salary.


Also the days of the 15 year mortgage are long gone for th emajority in Oz. Thirty years is more the norm now.

TrickyTree

Seems about right from my experience we were offered in the region of 7 x our combined salary with me on 3 months job probabtion and the other half temping. After I picked myself off the floor and stopped laughing in his face we went home and worked out what we could really afford.

bcworld

Its not quite the same because due to tax rates your take home pay on $140k would be less than double of what it would be on $70k - the loan repayment would be double though.

I also don't know about 30% savings......to my mind Australia is a nation of investors......its common to come up with a financial plan to accumulate debt in the earlier part of your life, with a view to using the capital gains to pay it off & retire on later.....so a lot of people wont have cash savings so to speak but do have geared investments hopefully working for them.....these reduce their income tax liability at the same time.

spartacus

Yes everything doubles:

$225000 interst only over the term (30 years) at 9% interest = $607500 + original loan amount = $832500

S450000 using same variables = $1215000 + original loan amount = $1665000

Meaning house prices need to quadruple during the 30 years period in order to 'make' any money.

Wendy

I don't think it is really, I mean if you pay back say 30% of your income in mortgage on 70k per annum you'll have less money left than if you pay 30% of 140k - wouldn't you?.
Ours is slightly more than that just now, about 40ish from memory (can't be bothered working it out ), but that's on a flat wage, which we don't often get as my OH is maintenance so works most Saturdays anyway. I can manage to save something usually, even if it's only $50 a fortnight, but we aren't and won't be rich with just one income. Then you have the unexpected bills, like my neighbours wall that we have to pay for because me OH drove into it and knocked it down - bye bye savings

Yes, I agree with that. House prices have risen by 20% here so had we waited to buy and saved instead then we wouldn't be able to afford anything now. That's why we decided to take the plunge even though it is costing us more of a percentage of our income - because we knew that by getting in now our income would go up, but our mortage wouldn't increase that much even with the interest rate rises.

That's made me laugh

tictac

20% growth last year? How long can this last?

Wendy

It's expected to continue growing in Adelaide for some time, not good news if your not on the property ladder, but it is if you are.

The houses in my area have gone from an average of $240k to $285k since we bought last April and is considered 'an ideal first time buyers' area.

tictac

Maybe NAB got their name based on their penchant to allow people to over commit and the subsequent repossessions which arise?

spartacus

Believe me, I sense your hysteria!

There was an intersting show on the box (I know!), must have been ABC. Looked at long term return on property and concluded that the average rate of increase was nearer 2% per annum.

spartacus

I don't think NAB are any more mercenary than the next bank. Their business is making money out of your money, or conversely out of your lack of money, and they're very good at it.