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*just thinking out loud*

December 26th, 2008 at 10:58 pm

I just want to write some things down so I can get a clear picture. Excuse my babbling!

There is a house we have found which is more than perfect for what we want. It's $319 000 asking price, which we could probably bargain down to $317 000 (or less), which is then atkeast 3k under our target amount for a house.

(the house is on an 805m2 block, 4 bedrooms, built in downstairs, three decks, a shed etc - i might post pictures in a week if it's still available)

We would have to resign our lease, which will then expire 19th April.

If we look into buying this house, if it's still unsold and no one else is interested, we could probably have everything done in a month to two months which would mean we would have to cancel our lease contract, which is really no biggy anyway with the rental crisis looming.

If we buy the house, we have approx $12-$13k saved. It would cover the mortgage insurance ($11.5k) and some fees. We either have a choice of putting the solicitor fees and building inspection fees on my cc and paying it back once the FHOG is granted. The rest of the FHOG (total is $14k) will go back into the mortgage to remain until we need it for renovations. (Please note: I don't need credit card preaching, so don't bother. That is not the issue I am discussing.)

Another choice we have is privately borrowing 5k from BF's mum in return for some labour work at her property which he is fine with doing. That would cover the fees.

If we don't buy this property, we have to start looking for others pretty soon. Ideally we would like to be in our own place atleast a month before our lease expires for breathing space (so, mid-march).

Why? you ask. why not rent longer?

A few reasons. We would be required to sign a 6 or 12 month lease in our next rental property, which would take us up to october. The rent we would be paying would be about the same cost or more as a mortgage per week. This would mean the only money we would be saving would be spare change plus other costs we don't have as a rental verse homeowner, like rates and water etc.

another reason is that the 14k FHOG expires on june 30th, going back down to 7k.

if we were to wait until after then, probably when a six month lease expires in october, we would not have that extra amount saved due to paying a lot of rent etc (as it would just be BF and I paying rent verse right now it being BF, myself and flatmate). so ideally we are looking at having $27k now ($14k of which comes AFTER we buy the contract), or having possibly $20k in six months time.

why pay mortgage insurance? i know it's a lot of money for really nothing, however - the FHOG is $14k, which covers the MI plus fees. if we DON'T utilise that, it means we are paying $5k MI (in october) of our own money, plus a 5% deposit and fees. so really the only difference is that we are into our own house sooner and paying it off sooner.

this way, while nothing is essentially free, we are able to save 6 months worth of dead rent money by putting it into our mortgage sooner, and we are able to utilise the upped FHOG - which was introduced to 'save' the economy.

All it really rests on now is whether the house is still unsold, and whether I can get approved for a loan in time.

9 Responses to “*just thinking out loud*”

  1. disneysteve Says:

    Forgive me for being American, but what the heck is FHOG and MI?
    How do down payments typically work in Australia? Here, 20% down is recommended. How much would you be putting down?

  2. Amber Says:

    FHOG is first time homeowner's grant I believe and I was wondering what MI was as well. Me personally, would say don't rush into anything, I say buy a home you love and not because the lease is expiring, you really don't sound too excited about this house. Also you don't want to really clean your savings out for this house what if something happensGood luck on what ever you decide

  3. whitestripe Says:

    MI is mortgage insurance - i mentioned it twice in the same sentence so i thought people would get the abbreviation lol.

    we are not putting a deposit down.

    we're not buying because the lease is expiring. we're extending the lease because the lease is expiring Smile
    i don't sound excited about the house because i don't want to get emotionally attached to it. it's more than what we want in a house - it's absolutely perfect and then some. i just don't want to fall in love with it to find out it's gone, is all.

    our savings are for the house, we have other savings, i am just talking about our house savings.

  4. Amber Says:

    I see, glad to know you have other savings. Is the housing market as bad there as here in the states maybe they'll be willing to knock more than 3k

  5. scfr Says:

    Forgive me, but the conservative old lady in me just has to ask: Are you ABSOLUTELY sure you want to buy a house with someone you are not married to? If you go ahead, please be sure that your investment in the property will be protected, no matter what happens. In other words, make sure you are listed as an equal owner. And unless you are covered under community property laws as common law spouse, have a legal written agreement about what would happen to the house should you split up: Would you be forced to sell the house? Could you buy your BF out? I really don't mean to sound doom & gloom, and I certainly hope the 2 of you will be happy forever, but if I had bought a house with the guy I was with at age 21 ... YIKES!

  6. disneysteve Says:

    Am I understanding correctly that you would be borrowing 100% of the purchase price? Again, I don't know how things work there, but here in the US that would definitely be a no-no. Even before the housing market crashed, it was a bad idea. Today, you probably couldn't do it if you wanted to because nobody would lend you the money.

    I say wait until you've saved up a substantial down payment.

  7. whitestripe Says:

    i've already been through the whole 'down payment issue' on other posts. we are not waiting for a 20% deposit.

    and scfr: yes. i am sure. the laws are different here.

  8. Tightwad Kitty Says:

    How safe are your jobs? I do know that you'll need to have deposit very soon as they are thinking of change the rules here. As rents are rising very fast here I have heard of $125 per week rise not so long ago with the minimum around $40 per week when you know that rent for a two bedroom unit is around $300 to $500 per week givin the area and state you live in before these rises. Rents are going up not down here.

  9. disneysteve Says:

    whitestripe, sorry I haven't followed the whole story. I'll browse back because I am curious why a down payment isn't needed in Australia. It's challenging for us to comment on your situation since the laws and guidelines sound like they are very different in Australia so the advice we'd typically give may not apply to you. No offense intended. Good luck. I hope things work out the way you want them to.

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