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How do you afford a mortgage

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#16 kisma


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Posted 21 March 2011 - 07:20 PM

QUOTE(flowerrose @ Mar 21 2011, 08:00 PM) View Post

Do you mind me asking why you're selling?

If you can possibly avoid it now may not be the time to sell.

I agree with earlier posters about you seeing a financial advisor.

I was thinking the same thing. Are you selling to pay back your parents? I would personally stay with that house, especially if it is all renovated and enjoy it for a bit longer. Don't stop wanting to buy a block of land and build, but perhaps now is just not the right time.

And I agree seeing a finanical advisor is probably a good idea, there are lots of free available to see.
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#17 tibs


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Posted 21 March 2011 - 07:31 PM

QUOTE(~Melissa~ @ Mar 21 2011, 04:37 PM) View Post

We figured out how much we could afford to pay and then we bought a house that fitted in that budget. Means we have a little house that needs some updating - but it's ours.

Yep this. I'd love to build a new house too but that doesn't mean I can afford to (unfortunately!)

So we have an older house in a suburb that isn't my first choice but it is what we can afford given our other choices i.e SAHM.

#18 Thelma


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Posted 21 March 2011 - 07:43 PM

We buy, renovate and then sell to make money and reduce our mortgage. My DH is a builder though so we don't have to pay tradies to do the work for us. We've been married nearly 6 years, we bought our first house after 6 months and just about to move into our 4th house. It's a total pain and I hate living in half renovated houses, but I keep reminding myself that it's short term pain for long term gain. We also make interest only repayments as the money we make on the house is essentially the payments, it also means we can afford the renos and living expense in the meantime. DH is self employed so the time he is working on the house we don't have any other income coming in.

We only have a $200 000 loan and I work 1 day a week (casual rate) and the money from my job pays the payments for interest only.

Our goal is to be debt free by the time Lily goes to high school (12 years) and hopefully we can do that sooner!

#19 utopia84


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Posted 21 March 2011 - 08:14 PM

I too am a bit confused about why you are selling, but from what I understood, do your parents want the $100,000 back now? Plus interest?

Are you able to redraw on your loan instead?

ANyway, DH and I are on about 80 - 90, 000 a year after tax (This is something I only realised after doing some recent budgeting.. imagine my surprise that even though on paper I earn about 15,000 more than DH, in reality I dont because I get bumped to a higher tax bracket pretty much taking away that 'extra'. HMPH!!!)

When we bought we followed our parents advice and bought a place we could afford (just, taking into account groceries and bills, but not 'entertainment' ) on one wage. As a teacher (me) the banks were willing to give us almost double on what we asked, but the reality is that it would have meant struggling.

It meant buying an older home, not in one of the new estates that are around us. We did spend slightly more than planned (389,000) though, this house needed so little renovation as it had a new kitchen, decking, bathroom etc but was only 10, 000 - 20, 000 more than other houses in the market at the time that needed almost complete overhauls. As hubbie is NOT a handy man this was a way better option laugh.gif We have not regretted it.

Our real test is now. I just started mat leave. I have full pay for 16 weeks, then we get the govt. mat leave, but that is almost half what I currently get. Plus, come October, all money dries up and we live on one wage until January, when I go back to work part time. I have no idea how we will cope, we have drawn up a budget, and if we stick to it we should be ok, but thre is not much wiggle room. I think I will look around for cheap Xmas pressies while we have money cos I suspect we may not have much spare come december, even though we have budgeted for 'gifts'.

If money is very tight, I will try to get casual work. I can work casual if on unpaid leave, so I will put my name down at my current school, and also my old school. If i got one day a week then that would help.

The reality is that if we can't afford for me to be on leave, then I won't be, Simple as that.

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#20 ~Bella~


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Posted 22 March 2011 - 05:16 AM

QUOTE(utopia84 @ Mar 21 2011, 09:14 PM) View Post

I too am a bit confused about why you are selling, but from what I understood, do your parents want the $100,000 back now? Plus interest?

Are you able to redraw on your loan instead?

We have to pay it back probably around june next yr, which is when we would think of selling the house. I am not redrawing on our loan as we will be paying them back an amount that has already had interest put on it, so unless they say they dont want the money for a yr or two (which could happen, havent talked to them about the nitty gritty yet) we will have to sell.... Hope that makes sense lol
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#21 Cole29*



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Posted 22 March 2011 - 06:04 AM

QUOTE(kazz @ Mar 21 2011, 03:03 PM) View Post

I 100% agree with Carolyn, get a mortgage that you could pay back on 1 income or 1 income and 1 part time income.

Hope this helps smile.gif

I agree with this in theory, but the reality for many families is that it is not feasible. In our case there is no way we could have afforded any half decent house that we could have paid off on DH's wage alone, as I am the higher income earner. We live in Sydney, which is ridiculously expensive, yet we live way out in the burbs (as in almost as far out as you get before no longer being in Sydney laugh.gif ) and we have an average sized 3 bed, 1 bath, 1 living area house on a small 450 sqm block, so by no means extravagent. The only houses in Sydney we could have bought that would have been manageable on DH's wage alone are in areas I am not willing to raise my son in, and no I am not being a snob, I am speaking from experience as I grew up in these areas.

To be honest I consider myself lucky (although sometimes I do forget this) that we can manage with me working just 4 days per week as I have lots of friends who have no choice but to work full time. I also have friends who are renting and desperatelty want to buy but can't get a deposit together, so again I feel lucky that we bought when we did and have "our own" home (that we are nice enough to share with the bank laugh.gif ).

Sam, I too would love to buy some land and build, we talk about it, but we both know it is unlikely, and certainly out of the question for at least the next 5-7 years. What we have now is what we will have for quite a while and we are OK with that (we still dream of course blush.gif ).
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#22 Porthos


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Posted 22 March 2011 - 07:21 AM

We are another couple who bought a house we could afford on one wage whilst we were still on two wages. We have a small house and it's not where we originally wanted to live but...we absolutely love it now so count ourselves extremely lucky!

We do what everyone has said: budget, few treats etc. It's tough but also just what we are used to now. Life is different anyway with two kids, less going out and what not, so that saves money in itself.

We are also lucky because DH gets this special army reserve scheme where the army pays a portion of our mortgage every month. This has been going on for about six months and is a Godsend as it gives us the flexibility to pay bills etc that we would usually be very stuck with. I also do casual teaching work as does DH (he is firefighter so on shift work), plus he is a reservist so gets paid for that too. Every little cent counts in this household!

Oh and I also could not survive without the credit card. It is kept on a pretty tight leash but it allows me to pay bills and buy bits and pieces we need NOW even when the money is not right there. I am very, very careful about paying it all pay in the 55 days though to get the interest free deal happening wink.gif

#23 -Sophie-



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Posted 24 March 2011 - 10:05 PM

Instead of selling and buying again with all the fees involved do you have enough equity in your current home along with the ability to pay back the bank?

Its tough we are only just starting out and it is scary but we have bought well and sorted things out. Budgeting is very important. Good luck in figuring it out.
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#24 Rain...



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Posted 25 March 2011 - 06:27 AM

reported. spammers are shitting me lately

#25 ***Jo***


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Posted 27 March 2011 - 08:59 AM

Our mortgage is rougly around $1400 a fortnight but I also put extra on top of that too. We both work full time. We are pretty lucky in the fact that we both earn good money in our respective jobs, but the reality is if I didn't work full time, we couldn't have this house.

When we decide to have a second child, we will really have to save hard to have that time off work.

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#26 KoolKat



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Posted 27 March 2011 - 09:40 AM

Our repayments are about $750 a week (I think). We have found that a good way to make sure we are paying off as much as we can is to get our pay put straight into the home loan. That way, we have to transfer from the loan for spending and bills which means we always think twice about whether it's a necessity or just a desire. Of course, this wouldn't work with all loan conditions but we have a pretty flexible loan that allows for additional repayments and redraws without penalties.

Before getting the loan, we created a "pretend" mortgage so that we could practice with the new budget. It had the added bonus of upping our deposit.

I am also a firm believer in just working on the one wage scenario and living within a comfortable loan that won't cause stress if you are out of work, sick or want to go on a big holiday. It has meant that our first house is not as nice as some of our friend's houses and is in a suburb we weren't too keen on but it also means we can move and upgrade again now without much stress.
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#27 *Simone*



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Posted 27 March 2011 - 10:33 AM

It's important to be realistic about what you can afford. I have lived my whole life in northwest Sydney, and while it's far from the most desirable area in Sydney as a whole you're got to live within your means when it comes to mortgages.

In short to afford our mortgage we saved up for 18 months while we were engaged and renting a crappy house at a mere $280 a week. On a combined income of just under $100k we saved about $40k in that year and a half, over a third of our pre-tax income. We did it by cutting the nights out, drinking, expensive activities and clothes. Which set us up well anyway for what our post mortgage life was going to be like.

When it came time to buy we looked at spending $330k as a maximum, which is well below the mean Sydney house price of about $500-550k at the time, but would get us a small 3 bed 1 bath 20 year old house with a backyard that had been partially renovated in a half decent area. We saw some terrible houses but we found a decent one that had a new kitchen and bathroom and didn't require any work like the majority for that price. It was 15k over our budget but we talked the owners down 10k and got it for $335k.

We were lucky in that we bought when house prices were depressed as only two and a half years since the place is probably worth $400k now. Also, the rates started to plummet so for awhile our required repayments on a loan of $290k (taking off the 10% deposit we'd saved) was just under $400 a week! It was the same amount that my cousin and her boyfriend were paying for a townhouse in Marsfield per week in rent at the time.

Now the weekly amount is $514, which we've fixed as we were getting to the top end of what we could comfortably afford after six or seven rate rises. It's still pretty small when you think that we could probably earn $400 a week in rent if we leased the place these days.

I think the important thing with mortgages is to make sure first you're not paying an inflated value on a house where if the market drops off you'll be left with more debt than property value. Secondly, check whether the rates at the time are historically high or low. If they're low they say you should budget for 2% in rate rises and still be able to comfortably afford the repayment amount.
Thirdly, anything over 30% of the househod income going in mortgage payment is apparently mortgage stress. Make sure you have a plan for things like unexpected illness, redundancy or unemplyment, maternity leave or living off one income if you're planning a family and one person stays at home.

#28 Allee


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Posted 29 March 2011 - 11:28 AM

The way house prices are now it's hard, isn't it? We were lucky that we bought our house nearly 7 years ago, when house prices were significantly cheaper than they are now. I don't think we'd be able to afford to buy this house now, as our first house.

When we bought this house it looked hideous. The kitchen was pink cupboards with purple benchtop, walls were painted a myriad of bright colours, carpet was badly worn, landscaping was awful.. but I saw the potential in it. I could see past the imperfections and could see it was a bigger house than others in that price range, and it was still a fairly new house and the only things wrong with it were cosmetic, but that turned a lot of people off, so we got it for a good price. I loved fixing our house up - renos can be done quite cheaply if you shop around, and the work has paid off.

We also bought in the area we wanted to live in, but not one of the "better" suburbs in that area. We are still close to all the shops and schools etc that we want to be near, but our house is better than what we could have bought for the same money in the next suburb over.

I'm only working part time and am about to go on maternity leave at half pay (as in, half of my part-time wage - so my weekly income will be virtually non-existant! tongue.gif). We are also building a new house, so will have repayments on our block of land (we're lucky we got the land cheap-ish for $270k), plus building repayments (we're estimating $300k to build), plus the close to $300k mortgage we still have remaining on our current house - so that's a total mortgage of nearly $900k to pay out of hubby's average salary and my very, very low income!! Needless to say we can't afford it all without a lot of help, so we are very, VERY lucky my parents want to help us out so we don't need to sell our house until we move in to the new one, and we are lucky that our current house has gone up quite a bit in value and we'll have a decent profit from selling it, which will lower our mortgage on the new house.

We're also making sacrifices on the non-essential items we spend our money on. We are having less takeaway dinners, very rarely eat out, and haven't had a holiday in gosh knows how long. That being said though, we've never had a lot of disposable income, so we're used to living without it. Living in a nice (but still very modest) house was more important to us than other luxuries, so we were happy to pour as much of our income as possible in to buying our house.

Shop around for your bank/lender as well - what may look like only a tiny difference in interest rates can save you lots of $$.

Also, whenever we could afford it we paid extra on our mortgage. Those extra repayments, plus any amount that had already been paid off our mortgage through our regular repayments, could be redrawn at any time we needed cash, which has come in handy on a few occasions when we have had a pile of bills all come at once, or unexpected large expenses.

So I think to answer the question, how we afforded a house/mortgage was:

- Look for a cheaper house that has potential, or even factors that may turn others off - it may not be perfect when you move in but with a little bit of work it can be made in to a beautiful home for a lot less $$ than you would otherwise spend on buying it if it already looked fabulous
- Compromise on suburb
- Cut back on spending in other areas and really save, save, save! The less you have to borrow the more affordable your repayments will be
- And of course we had a bit of luck buying before the house prices jumped to what they are now! blush.gif
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#29 *****030812


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Posted 10 April 2011 - 08:32 AM

QUOTE(Allee @ Mar 29 2011, 11:28 AM) View Post

The way house prices are now it's hard, isn't it? We were lucky that we bought our house nearly 7 years ago, when house prices were significantly cheaper than they are now. I don't think we'd be able to afford to buy this house now, as our first house.

ditto. If we hadn't bought our land and built when we did (9 years ago), there is no way we could have afforded to do it later, especially after kids. I really feel for those starting out now as it just seems impossible. This is one reason I want our house paid off asap, so that when we are gone if our children cannot afford their own home, at least they will have ours.

I would sit down with your parents (or was it his?) and discuss the situation. If they don't 'need' the money I would ask if they could extend the amount of time before you have to pay it back indefinitely. If you had to sell to pay them back, then surely that defeats the whole purpose of borrowing off them in the first place doesn't it?

Like some others have suggested too I would look at ways of cutting expenses in other areas. If you have pay tv, get rid of it, memberships that aren't being used. Expenses that can be paid annually rather than monthly etc etc.

And ditto to what Allee said aboutmaking extra repayments when you can. We have done this from the very beginning as we knew that once we had children that we would have less money.

eta: re: the paying back with interest...........just curious as to why they want interest? If they just wanted the straight $100k back that is less stress for you guys. It just doesn't seem like they have done you any favours if in the end they want it all plus more back in the end and so quickly too.

#30 babybonus


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Posted 10 April 2011 - 09:17 AM

Do you have to pay your parents back in full or is it possible to pay them back in installment. It seems cruel to lend you the money in order to buy a house and only for you to be forced to sell in order to pay them back.
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