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First Home Buyer - about to take the plunge

Discussion in 'Real Estate' started by Danny, 1st Oct, 2007.

  1. Danny

    Danny Member

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    My partner and I are just about to take the plunge and purchase our first home ( a unit ) in the Surry Hills, Waterloo, Redfern area of Sydney.

    Just wondering if anyone had any tips or advice they'd like to share, or any other guidance on how we're thinking of putting the lending together.

    My parents have offered to either provide us about 10% as a gift or alternatively establish a family guarantee arrangement to cover approx 20%.

    This seems to be a preferred option as we avoid LMI and can borrow 100% of the purchase price with our current savings and the FHOG as a buffer.

    Purchase price approx $480-500,000, split 15% variable 85% fixed, interest only for 3 years.

    Given our current household income is due to change significantly over the next 2-3 years, we like the option of keeping a large portion I/O to keeps our committed payments a little lower, to ensure we can service the repayments only on my salary (approx $110K per annum)

    My partner is a soon to graduate primary school teacher and it is likely that there will only be casual and temp roles available for the next 2-3 years, hence the I/O. But we could then contribute extra to the variable loan (or keep it in the offset) as the money came in....

    Does anyone else have any other ideas?

    I'm actually a mortgage lender with one of the big banks and I'm trying to make sure I'm not getting tunnel vision and missing something big

    Thanks!

    Danny
     
  2. Simon

    Simon Well-Known Member

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    I would leave it IO for as long as possible then renew that option as you can.

    Save in an offset account. You would understand that this is "virtually" the same as paying down the loan.

    A inner city unit probably wont be your home forever. Few of us buy a home for life as my grandparents did.

    By using the offset you leave the loan untouched. So if you upgrade your home you can now elect to keep this one as an IP and transfer your "repayments" and preserve the original loan which is now deductible.

    If you followed my grandparents advice and paid down your home ASAP you may not have this choice. If you do keep it as an IP you will have all your equity against an IP and perhaps 100% nondeductible debt against the new PPOR.

    Just something to consider,
     
  3. Danny

    Danny Member

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    Thanks Simon,

    The "plan" at the moment is to set it all up IO with a larger portion fixed to protect us against any adverse rate movements, especially while the second income is a little inconsistent.

    Leave the variable portion IO with an offset and keep everything there, again trying to keep our payments as low as possible.

    Next step is to finish co-ordinating the AIP, which is being made more difficult as we're in different states, and using an instituion other than the one I work for as the property being offered for the family guarantee is currently held as security by OFI.

    On a brighter note, the property we'd seen that sold last week now has it's mirror image up for sale.... agent rang me yesterday to let me know... so we should be in a position to make an offer this week, and we know what we got beaten on for the original property.
     
  4. MattR

    MattR Well-Known Member

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    I can't really add anything on the lending side of things, but perhaps suggest a Unit Trust to purchase the property for future variability for tax purposes.
     
  5. DaveA

    DaveA Well-Known Member

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    Matt - its a first home buyer so by buying in a trust their lossing the Stamp duty exemption and delaying the FHOG, best to buy in your own names and pick up 25k or so.....
     
  6. islandgirl

    islandgirl Well-Known Member

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    I agree with Simon. I wish I had done the same when I had by first property. I should have done it IO and kept the surplus funds in the offset account. You should definately take a long term focus on these things.
     
  7. Nigel Ward

    Nigel Ward Team InvestEd

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    Simon is spot on.

    I'd add, although this will be your home you should keep in mind that it may not be forever...as has been mentioned. As such try to buy as big as you can and with parking.

    Make absolutely sure you don't fritter away the saving by having the loan interest only. Sounds like you're getting your Automatic Investment Plan set up so that's good.

    Good luck on what could be the first of many properties...and remember from small seeds great trees grow!

    Cheers
    N.
     
  8. Leandro

    Leandro Well-Known Member

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    Think hard about the proportion which you fix if you plan to debt recycle. I fixed a larger proportion for the same reasons as you, i.e. to protect against adverse rate movements, however my debt recycling happened quicker than i thought (which is a good thing) and now i am having to get my mortgage broker to talk to the banks about breaking apart some of the fixed component.

    my 2c.
     
  9. DaveA

    DaveA Well-Known Member

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    so how much did you start with? Ive apportioned 15% of the loan for 3 years, but ive been worrying it might not be enough. Our loans arnt structured for debt recycling as we are attempting to pull out of the share market for the first few years of the house but even i think when the day comes to hit the last sell button i wont be able to...
     
  10. Leandro

    Leandro Well-Known Member

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    I did 30% variable and 70% fixed.
     
  11. Jacque

    Jacque Team InvestEd

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    Hi Danny

    Would love an update on how you went securing the unit- hope it all went well?

    Offset account is definitely the way to go- I only wish I'd discovered them years ago!! Most flexibility, particularly if you want to reuse equity down the track for other projects :)
     
  12. Danny

    Danny Member

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    First formal offer goes in tomorrow with strata and building reports due Wednesday. The vendor has agreed to consider our first offer once we put it in writing.

    Vendor wants to settle before Christmas so we'll like to echange in the coming fortnight if the offer is accepted.

    Had the opportunity to spend 2 nights in the same floor-plan unit as a colleague of my partner's parents owns one which he rents fully furnished so we moved in for a couple of days in between tenants before the painters came in to repaint.

    Nothing of note came out of living there for a couple of days and we did Thursday/Friday night so we get some idea of what the complex is like.

    All looks good so we'll see how receptive the vendor is to the offer, hopefully there'll be some great news to post in the coming days.
     
  13. Jacque

    Jacque Team InvestEd

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    Best of luck then, Danny. Hope it all goes your way and you're in before Christmas :)
     
  14. Danny

    Danny Member

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    the offer was accepted.....

    Just thought I'd let you know the offer was accepted today subject to strata, building and body corporate reports being completed.

    We actually got it for a little less that we expected to (won't say exactly how much) but we're happy with it....

    Hope to exchange next Friday!
     
  15. Jacque

    Jacque Team InvestEd

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    Well done, Danny! Hope the reports come back OK but, if not, you can always use them as a further bargaining tool if you feel you're able...

    Welcome to the wonderful world of home ownership :)