What to do?
Hi all,
I am 34yrs old. For the past 10 years I have been the sole income earner for my family with my wife has been a stay at home mother up till 2004 when both of our children where finally at school age. My wife for the past two years has been undertaking TAFE studies to return to the workforce that we hope will be at the end of 2005.
With our family being on a single income, we have not generated any savings that could be counted towards a deposit. Personally, I believe the Sydney House Market has out priced us from buying a home in Sydney, where I work as a Permanent Firefighter with the NSW Fire Brigade.
I see our last chance of owning a house would be to buy a house through the Defence Housing Authority (Aust) in the Newcastle region. With the lease back arrangement that the DHA has in place and negative gearing, we are thinking we would be able to move into the house at the completion of the lease back period, some 9 – 12 years down the track, about the same time it would take me to transfer to the Newcastle region.
Does this sound like a worthwhile plan? The main concern I have is Renting while paying off the loan. A work college has done the same as I am thinking, he & his wife brought a DHA property for around the $380,000 mark 3 years ago and with negative gearing and the rental income, they pay around $80 towards the loan per fortnight, does this sound right?
If so, I was hoping to get some kind of guidance or information on what our options would be for Finance and what the finance would cover, fee’s etc; and what we would need in place to improve our chances of gaining finance based on a property of around the $380,000 mark.
Otherwise, would it just be easier to buy a new Car!
Regards
Grant Quinlan
Ph: 0408 209018Grant
Ph:0408 209018Hi Grant,
Without a deposit you will require 100% finance, you will also need funds to complete the purchase such as stamp duty etc, there are lenders that will lend 106% of the purchase price to help cover this but the rates are high,Have you considered using the FHOG to get into the market, as this may help with the closing costs,
On the other hand even with the FHOG and without any savings or equity you will still require a 100% finance product, Cheers.Regards
Steven Crane
Mortgage BrokerMobile Mortgage Market
Ph: 0402 483 216
[email protected]
http://www.mobilemortgagemarket.com.auPLEASE note comments made should not be taken as specific taxation, financial, legal or investment advice.
Steven,
I am hoping we should have a small deposit in 12 months time once my wife is working.
The problem I face is that I don’t think I could afford to buy a house to live in, as I think the repayments on a $400,000 home load would be around the $1,200 p/f mark over 30 years, my whole net pay!
But with negative gearing I think I may be able to afford repayments on a DHA house till such time as my wife is on a good wage and then increase our repayments, or even buy a 2nd DHA house.
Grant
Grant
Ph:0408 209018Grant,
A $380k loan @7.32% over 25 years paid fortnightly is going to cost roughly $1275. Your colleague must have had a substantial amount of equity on that sort of money to be only paying $80 per fortnight. Considering that DHA take 15 – 16% of the income as a management fee as well. My experience when looking at these deals is that unless you’re going in with a substantial deposit, your going to be heavily negative geared. I personally wouldn’t be comfortable with that. This severely hinders your cash flow for possibly a long period of time.
In saying that, I have friends who have purchased DHA properties, however, they are dual income households and they bought when DHA were a bit more reasonable on there pricing. DHA properties are too expensive in my view.
With no deposit I would have thought you would be far better served to continue saving and use the FHOG like everyone else to try and enter the market. Is it an option to start with a lower cost IP first, say a unit in Logan Central at $110k with as little as $5500 down plus costs. Slowly increase your equity, over time, get a revaluation etc etc etc.
Hope this helps.
Hi Grant,
Peronsally the DHA property are not something I would go after. If you are putting yourself in a situaton where you put miney towards the property each week out of your own pocket you need to ensure that the loss is covered by capital growth.
ie you pay now because you think that the property will go up more than it is costing you in the future.
I ma only suggesting this because you asked. I would start with a detailed money diary. You could use a spreadsheet and add up every sent you spend and where you spent it. You need to find out where your money is going.
Once you have done that do a budget and start saving. This sounds very simple but it is something that many people never get around to doing and then wonder where all their cash is going.
It is a good time in the property cycle for your situation. Property prices have leveled off and you can now save without hopefully being priced further out of the market.
I am assuming that as a fire fighter you have plenty of spare time (14 hrs shifts ect) so you could use that to your advantage.
When the time is right find a property that you could add value to through a cosmetic make over and start from there.
Cheers
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