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Mortgage - Push your self or be conservative?


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#1 happygoluckyinoz

Posted 06 February 2017 - 04:45 PM

So we are selling up and moving closer to the City/Work/Life in general.

We moved 20km south of the City (Perth) 4 years ago and don't like suburbia, we want better transport links, better schools, nicer area generally and the ability to walk to amenities - and to get off the damn Kwinana Freeway in a morning.

All this costs a lot more than where we are now.

Would you push yourself to the maximum the banks will lend (and you can afford) to get yourself a green title block with a livable house on it less than 5km from the City? We are thinking long term, this is the house we will raise our children and send them to school in.

Or do you be more conservative and go for something smaller, potentially a townhouse, that you can't really 'add' much too, but finances will be easier in the short term.

We are planning a second child which will make things tighter, both DH and I are in stable well-paying jobs, with DH eyeing up a promotion in the next 6 months.

Risky? Or the right move considering in Perth you can actually get something close to the City for under $1m?

#2 jayskette

Posted 06 February 2017 - 05:46 PM

get the most expensive place you can afford in the area that you want to live in. happiness with your living situation really do translate to better work, more money etc. plus when you do move again you get a good source of rental income.

#3 MrsLexiK

Posted 06 February 2017 - 05:50 PM

I'm normally conservative but in this instance no I would go as high as I could (factoring in interest rates) and try and pay as much as possible now. That close to the city is unlikely to be affected by housing slumps and having a title is a major draw card.

#4 Cimbom

Posted 06 February 2017 - 06:03 PM

Is a compromise of say 10km from the city an option? While being close to work/amenities is great and something I really value, I'm also wary of the cultural push to always upgrade homes and remain on the mortgage treadmill. I am very much looking forward to having that money as disposable income that I can spend on anything I want. It depends on your perspective I guess

#5 happygoluckyinoz

Posted 06 February 2017 - 06:07 PM

View PostCimbom, on 06 February 2017 - 06:03 PM, said:

Is a compromise of say 10km from the city an option? While being close to work/amenities is great and something I really value, I'm also wary of the cultural push to always upgrade homes and remain on the mortgage treadmill. I am very much looking forward to having that money as disposable income that I can spend on anything I want. It depends on your perspective I guess

Not really, we don't think we'd achieve what we are hoping for with a move of only 10km. Only really the inner-City suburbs or the higher-priced western suburbs of Perth have any amenities within walking distances (by that I mean, shops, restaurants, cafes, bars, cinemas etc) and still work as a commute for us. The idea is that we would be able to either get short public transport to work or walk. By only shifting 10km closer we wouldn't be able to do this and would still be in suburbia and need two cars to get to work.

#6 LuckyMummy ♥♥

Posted 06 February 2017 - 06:10 PM

I usually say borrow as much as you can as prices only go up... so short term pain for long term gain. but that's for melbourne or Sydney.

Have Perth house prices stabilised? I heard they had quite a drop offer the mining boom and that sort of variability in house prices means you might not have the back up plan of selling should your wages drop or should you lose a job.

So in your situation I'd be borrowing a lot, but factoring in a potential property price dip in the future as well as interest rate increases.

#7 Cimbom

Posted 06 February 2017 - 06:13 PM

In that case, I would go for the inner city property but I'd make sure the savings from not needing an additional car etc go on to the mortgage to pay it down asap. Good luck :)

#8 Tinkle Splashes

Posted 06 February 2017 - 06:19 PM

We did this last year.  Bought a 100 year old house in Mount Lawley, on a full size block, for around $800k (it needs some work!).

My trip to work is less than 10 minutes.  We walk to parks, cafes and bars and can get a bus to the city every 3 minutes during peak hour.  

It was a stretch, but no regrets yet.

#9 happygoluckyinoz

Posted 06 February 2017 - 06:19 PM

View PostLuckyMummy ♥♥, on 06 February 2017 - 06:10 PM, said:

I usually say borrow as much as you can as prices only go up... so short term pain for long term gain. but that's for melbourne or Sydney.

Have Perth house prices stabilised? I heard they had quite a drop offer the mining boom and that sort of variability in house prices means you might not have the back up plan of selling should your wages drop or should you lose a job.

So in your situation I'd be borrowing a lot, but factoring in a potential property price dip in the future as well as interest rate increases.

There are signs that the inner-city suburbs are picking up - more buyer activity and agents (as usual) are seemingly a bit more positive. I can see that the properties we are looking at are going for the asking price, or slightly more.

Unfortunately our suburb is a bit slower, so hoping we can sell before we miss out on where we want to go.

View PostCimbom, on 06 February 2017 - 06:13 PM, said:

In that case, I would go for the inner city property but I'd make sure the savings from not needing an additional car etc go on to the mortgage to pay it down asap. Good luck :)

That's the plan! We should have a healthy saving from selling a car and not having the associated rego, fuel, parking, servicing, insurance. It's currently costing us over $600 a month to both get to work at the moment, so any savings will be funneled back into the mortgage.

#10 DaLittleEd

Posted 06 February 2017 - 06:20 PM

I would try and get the biggest block possible, in an area you want to live, without putting to much strain on the budget. This might mean living in a smaller / older house while saving for a reno.

In your case, be careful to not needlessly rule out areas. One thing I have found handy is to look one suburb further out than the areas I am considering, and then looking to see if any areas of that suburb have decent transport links, or are walkable. Often going one extra suburb gives you more bang for your buck, without substantially decreasing amenity, expecially if you cross over from a well known area to an unknown suburb.

Also in Perth, consider cycle paths / routes if this is an option for you.

#11 mum2345

Posted 07 February 2017 - 12:24 AM

View PostLuckyMummy ♥♥, on 06 February 2017 - 06:10 PM, said:

I usually say borrow as much as you can as prices only go up... so short term pain for long term gain. but that's for melbourne or Sydney.

Past performance is not always an indicator of future performance.

#12 hills mum bec

Posted 07 February 2017 - 08:53 AM

It would depend on what your future income prospects are.  Are you at the bottom of the ladder career wise or are you near the ceiling?  When we bought our first house 20 years ago we borrowed to capacity and it paid off because house prices almost tripled over the next 10 years and so did our salaries.  We bought our house for $130K and sold it for $370K after 12 years.  The house we bought 8 years ago hasn't really had much capital growth at all and our salaries have not really changed much either and I don't expect them to increase a lot because of the positions we are now in.  We were lucky that we had that capital from our first property so we didn't have to extend ourselves with our current house.  If you are in a position where you don't expect a lot of salary increases in the future then I wouldn't borrow to your max.

#13 seayork2002

Posted 07 February 2017 - 09:38 AM

I would be conservative - IMO I don't care what a house looks like/has/location I just could not enjoy it if it cost too much - we only have one child so there is no way I would buy a 6 bedroom house when a 2/3 bedroom would do for example.

#14 SeaPrincess

Posted 07 February 2017 - 09:44 AM

We've tended to borrow conservatively, then push ourselves with payments.

When we were looking to buy last time, we had a very narrow selection of Perth suburbs that we were interested in based on high school zones, and it got smaller as we looked at more properties. It took us over a year to find our current house and for everything else to fall into place (we saw one other house that I loved, but we weren't ready to put our own house on the market).

#15 CallMeFeral

Posted 07 February 2017 - 10:12 AM

The best investment is normally closer to the city and as much as you can afford to borrow for the biggest piece of land in the best area you can.

But it's a risky position to put yourself in. I personally am risk averse and wouldn't do it unless you have a backup plan in case one of you loses a job - can you cut down your expenses enough to survive, liquidate shares, borrow from family?
If not, I'd go more conservative but still push yourself with repayments. The ideal compromise might be a less livable house but in the best area with your own land - then cane yourself with high repayments until you've built up a buffer - then fix it up. Best of both worlds risk/return-wise but you have to sacrifice by having a crappy house for a while.

#16 lizzzard

Posted 07 February 2017 - 10:25 AM

All I would say is not to use what the banks will lend as your guide for whats affordable - it might marry up, but is might also be much more. Personally I am comfortable borrowing about 1/2 of what the bank will lend us...but its a very individual call isn't it?

#17 happygoluckyinoz

Posted 07 February 2017 - 10:31 AM

View Posthills mum bec, on 07 February 2017 - 08:53 AM, said:

It would depend on what your future income prospects are. Are you at the bottom of the ladder career wise or are you near the ceiling?

We definitely are not at the top of our careers, probably still what we'd call entry-level. DH hopes to double his salary over the next 10 years and although mine might be fairly stable whilst we have children once I get back to a career focus I would hope to be earning at least 50% more.


View PostSeaPrincess, on 07 February 2017 - 09:44 AM, said:

We've tended to borrow conservatively, then push ourselves with payments. When we were looking to buy last time, we had a very narrow selection of Perth suburbs that we were interested in based on high school zones, and it got smaller as we looked at more properties. It took us over a year to find our current house and for everything else to fall into place (we saw one other house that I loved, but we weren't ready to put our own house on the market).

Do you mind me asking which suburb you went for? We are looking based on HS too (although a long way off) and considering Churchlands, Mt Lawley & Shenton College as catchment areas.

View PostCallMeFeral, on 07 February 2017 - 10:12 AM, said:

The best investment is normally closer to the city and as much as you can afford to borrow for the biggest piece of land in the best area you can. But it's a risky position to put yourself in. I personally am risk averse and wouldn't do it unless you have a backup plan in case one of you loses a job - can you cut down your expenses enough to survive, liquidate shares, borrow from family? If not, I'd go more conservative but still push yourself with repayments. The ideal compromise might be a less livable house but in the best area with your own land - then cane yourself with high repayments until you've built up a buffer - then fix it up. Best of both worlds risk/return-wise but you have to sacrifice by having a crappy house for a while.

We have a lot of fat in our expenses that can be culled if we had to (cleaner, gardener, foxtel, eating out etc) and we do have the benefit of 'the bank of mum and dad' if it all went disastrously wrong. The houses we are looking at are what we'd call livable and we could invest the money in them renovating over the next 2-5 years.

#18 CallMeFeral

Posted 07 February 2017 - 10:37 AM

View Postlizzzard, on 07 February 2017 - 10:25 AM, said:

All I would say is not to use what the banks will lend as your guide for whats affordable - it might marry up, but is might also be much more. Personally I am comfortable borrowing about 1/2 of what the bank will lend us...but its a very individual call isn't it?

Very individual. I'd like to borrow twice what the bank will lend me! Having 3 kids and DH having an irregular contracting income means they want to lend us very little, and it's very frustrating.

View Posthappygoluckyinoz, on 07 February 2017 - 10:31 AM, said:

We have a lot of fat in our expenses that can be culled if we had to (cleaner, gardener, foxtel, eating out etc) and we do have the benefit of 'the bank of mum and dad' if it all went disastrously wrong. The houses we are looking at are what we'd call livable and we could invest the money in them renovating over the next 2-5 years.

I think given that, I'd go the stretch. You just want to hedge against the risk of losing your house, which is the worst investment result ever - but if that can be covered off with some extreme budgeting and budgeting, then I'd stretch as far as you can.

#19 Akadia

Posted 07 February 2017 - 10:40 AM

View Posthappygoluckyinoz, on 07 February 2017 - 10:31 AM, said:

We have a lot of fat in our expenses that can be culled if we had to (cleaner, gardener, foxtel, eating out etc) and we do have the benefit of 'the bank of mum and dad' if it all went disastrously wrong. The houses we are looking at are what we'd call livable and we could invest the money in them renovating over the next 2-5 years.

Just make sure you don't cull too much as the reason you are moving closer to the city is to enjoy the closeness of facilities like cafes where you an eat out.

And I do like the idea of buying a property you can add value to. We've just done that and this means not only can you make it your own but your house will be worth more in the future.

Good luck!

#20 DaLittleEd

Posted 07 February 2017 - 11:18 AM

View Posthappygoluckyinoz, on 07 February 2017 - 10:31 AM, said:


Do you mind me asking which suburb you went for? We are looking based on HS too (although a long way off) and considering Churchlands, Mt Lawley & Shenton College as catchment areas.


Something to consider here is that the new City Beach or CBD high school (depending on who gets elected) will probably have flow on effects to these catchment areas, particularly Churchlands. Also, population distribution by the time your kids are ready for HS will also have an impact. As an extra complication, HS performance is highly dependent on the principal. So on the whole, I wouldn't let school zones influence you to much.

#21 teaspoon

Posted 07 February 2017 - 12:21 PM

It sounds like you guys have plenty of motivation and energy to take on a bigger mortgage, so go for it.

Personally, as the big five-oh draws near and after a decade as a sole parent and (the feeling) I'm running out of steam working for myself, I'm tired of having *any* mortgage and wish I'd bought my last house within my means.

#22 22Fruitmincepies

Posted 07 February 2017 - 06:44 PM

Are the banks willing to lend you something ridiculous? Does that give you more wiggle room than your previous budget? Could you still get something for a bit less than the max the banks will lend? The market seems pretty flat at the moment, I think now would be a good time to make a move, even if it does stretch you for a while.

#23 SeaPrincess

Posted 07 February 2017 - 09:10 PM

View Posthappygoluckyinoz, on 07 February 2017 - 10:31 AM, said:

Do you mind me asking which suburb you went for? We are looking based on HS too (although a long way off) and considering Churchlands, Mt Lawley & Shenton College as catchment areas.

I'll PM you. We're SOR.

#24 Overtherainbow

Posted 07 February 2017 - 11:17 PM

I lean towards the conservative and then work hard to pay it off fast.  I feel Perth is still set up for one parent to work in the city and the other in suburbia.

#25 happygoluckyinoz

Posted 07 February 2017 - 11:38 PM

View Post22Fruitmincepies, on 07 February 2017 - 06:44 PM, said:

Are the banks willing to lend you something ridiculous? Does that give you more wiggle room than your previous budget? Could you still get something for a bit less than the max the banks will lend? The market seems pretty flat at the moment, I think now would be a good time to make a move, even if it does stretch you for a while.

It depends on what you think ridiculous is I guess! They'll lend us around 4.5x our income which should buy us a house on a block within 5km of the City in fairly nice suburbs and good school catchments. Won't be a palace (3x1 renovator probably) but should do the job. We've looked at houses in the $100-$150k cheaper and they are just too small.

View PostOvertherainbow, on 07 February 2017 - 11:17 PM, said:

I lean towards the conservative and then work hard to pay it off fast.  I feel Perth is still set up for one parent to work in the city and the other in suburbia.

What makes you say that? I guess there are a lot of jobs spread around the place, both DH and I work in inner-city Suburbs rather than in the actual City.

Edited by happygoluckyinoz, 07 February 2017 - 11:55 PM.





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