Aus­tralians as­pire to own their own home. How do you make it hap­pen?

Townsville Bulletin - - NEWS -

THE short an­swer is: with great dif­fi­culty. In June, Canstar. com. au crunched the num­bers on home loan af­ford­abil­ity. Even at our his­tor­i­cally low home loan rates, an av­er­agepriced house takes 22 per cent of af­ter- tax in­come for a Vic­to­rian cou­ple who are both on av­er­age salaries. In Queens­land it takes 20 per cent of the com­bined af­ter- tax in­come and in NSW it’s 24 per cent. Heaven for­bid if one of those two peo­ple should lose their job, want to take time out for study, or take any un­paid ma­ter­nity or pa­ter­nity leave.

So if you do want to own your own place in a good lo­ca­tion, the best ad­vice I can give is to study hard, choose a ca­reer you love and work re­ally, re­ally hard to ex­cel at it. Be­cause in the ab­sence of any gov­ern­ment ap­petite to limit the un­fair in­flu­ence of in­vestor power in the hous­ing mar­ket, you truly will need, as the Trea­surer baldly stated, a re­ally good job.

Once you have man­aged to buy a home, of course, you don’t re­ally own it – the bank does. So it makes sense to get your home loan paid off as quickly as pos­si­ble.

As an ex­am­ple, a $ 300,000 home loan over 30 years at an in­ter­est rate of 6 per cent will cost around $ 647,000 by the time you pay it off. If you in­crease your re­pay­ments by, say, $ 300 per month though, that same loan would be paid off in 21 years at a to­tal cost of $ 527,000.

The same home, owned nine years sooner, and cost­ing $ 120,000 less. That’s a good sav­ings strat­egy! “IF you’ve got a good job and it pays good money …” Joe, had to pun­ish you for that one again. You walked into it, buddy.

The “how” you do it de­pends on only one thing: how badly you want it. If it’s your num­ber- one fi­nan­cial pri­or­ity, if you want it so bad you’d sell your mum for it.

Don’t sell your mum. But if you want it re­ally badly, you will find a way.

There are two as­pects to the chal­lenge. The first is get­ting your de­posit to­gether. That’s about sav­ing, about de­layed grat­i­fi­ca­tion.

It’s about not spend­ing, about con­scious de­ci­sions to eat in, to not buy those new shoes/ that jacket, to buy cheaper cars, to have cheaper hol­i­days, to take the overtime when it’s of­fered ( rather than go­ing to the pub, mak­ing it a dou­ble win).

And sure, if you’d con­sider work­ing harder to get that pro­mo­tion, or switch­ing to a new, more lu­cra­tive ca­reer, then that’s prob­a­bly what Joe Hockey was re­ally talk­ing about. He just said it like a klutz.

The sec­ond chal­lenge is wip­ing out that huge mort­gage, so that the house is yours and not the bank’s.

That, again, is about sac­ri­fice. Pay­ing ex­tra off the mort­gage ev­ery month, which again means cheaper cars/ hol­i­days/ shoes. About putting part of ev­ery fu­ture payrise into higher mort­gage re­pay­ments.

Tell me I’m wrong. If you want it badly enough, you’ll make the sac­ri­fices you need to. MOST Aus­tralians buy their prop­erty with a home loan. To get the best in­ter­est rates you should have at least 20 per cent of the pur­chase amount in sav­ings – the de­posit. This gives the len­der com­fort that you have the dis­ci­pline to save, and also means you won’t need lenders mort­gage in­sur­ance ( LMI).

So an im­por­tant first step is to save the de­posit. I ad­vo­cate set­ting a goal and mak­ing a plan to get there. You’ll need to do a re­view of your out­go­ing ex­penses and be cut­throat about re­mov­ing the lux­ury ex­penses.

Many reg­u­lar, small con­tri­bu­tions usu­ally work bet­ter than a few lump sums. If you’re a cou­ple, live on one per­son’s salary and save the other in a high in­ter­est online sav­ings ac­count. If you’re sin­gle, or the only bread­win­ner, get a sec­ond job and bank all of your wages.

Re­mem­ber there are in­ci­den­tal costs of buy­ing prop­erty – such as so­lic­i­tor fees and stamp duty – just as there are first home­owner grants. Build these into your bud­get.

You should also be­come an ex­pert in the area you want to live. Walk around the sub­urb, talk to real es­tate agents and fol­low the prices be­ing paid.

In the mort­gage mar­ket there’s around 1.5 per cent dif­fer­ence in in­ter­est rates be­tween the same loans. Do your home­work and don’t over­pay, be­cause you’ll be over­pay­ing for a long time. The best ad­vice is the old­est when it comes to buy­ing prop­erty: set a goal, have a plan and show some dis­ci­pline.

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