Happy New Year!
My house owner friends next recommended that I speak with a Mortgage Broker. They gave me the contact details for their own agent and a personal recommendation about his helpfulness for them and other family members.
You can choose to work directly with a particular Bank or Credit Union or other Commercial Home Loan lender when you apply for a loan and they do have their own lending specialists... However, I was a bit wary because ultimately a home loan lender is a salesman, so they are going to sell you the best product for their employer. They are also biased and are only going to talk about their products and not mention any of their competitors. The bank mortgage lenders also receive a payment or commission from the bank when they sign you up for a home loan.
I rang my friends broker in August 2012, I was curious to know if I was just kidding myself, or if we really were in a position to be able to buy a home.
He was very friendly and helpful, he asked about my current financial commitments and savings. He was quite positive that I was moving in the right direction and gave me tips on how to manage my finances in order to paint the best picture. He gave me an idea about how far along I was in saving my deposit and just gave me a realistic overview of my situation. This advice was all given obligation free. He was also able to explain some of what my credit report was actually saying and he talked about the tips I gave in my previous post regarding credit history.
He did not push me in any way and left it all up to me for how I wanted to proceed because I was not yet ready to try for a loan.
The best thing about the first call to the Mortgage Broker was that he let me know I was not daydreaming and I was getting closer to my goal of buying a home. This made it a bit more real for me and made it easier to meet my savings goals and tighten the belt a bit more. I actually believed for real that we could do it!
I took his advice and used some of it to understand where we were at and I changed some things around and just kept plodding forward with my savings plan. I was most surprised to learn that I did not need as big a deposit as I first feared... I was thinking $50K minimum.. he gave me some tips on how I could best capitalise on my current savings situation.
I also started to think about our upcoming house move. I knew that we were going to have to move, I had already decided this because I was not happy to pay such a high rent any more and I had already refused to accept our last $10 rental increase. Sideline: Something else we did not realise as rental market consumers but which helped us save some money. We do have the right to refuse to accept a rental increase, if it is not reasonable! I collected information about the rents being paid by several other people in our street/ neighbourhood and the suburb in general and then presented that to show that we were already paying a fair price for our rental, as it was already mid to high range for our area. I said that we would not renew our lease if they insisted on the increase and the landlord decided they would rather keep us as tenants than try to get new people in so, I also insisted on a 1 year lease instead of another 6 month lease. This guaranteed us 1 more year at our currently manageable rent of $330/ week.
So it was August and our current rental lease was due to finish in December 2012. I started by organising our home and sorting out the kids clothes and toys and baby items that we no longer needed and which were just taking up storage space. I knew I did not want to move those things to our next home so, I started to list them on free sites like: Gumtree and Traderoo and we held a couple of garage sales. Any money we randomly received from selling our used stuff was channelled back into our everyday life and it all helped to save even more for our deposit.
I was a bit unsure about the Mortgage Broker at first because I did not know how it works. Here is a basic summary list of what you get:
- You do not have to pay any upfront fees to a broker, in fact you do not personally pay them anything.
- They are paid when they get a commission (from the lender) if they are the agent that signs you up to a particular bank. This means they do have their own agenda, they want to get paid and earn a living like anyone else. It is similar to how the bank agent also gets paid, difference is they are self employed.
- The bank does not add that broker commission cost directly to your home loan.
- The benefit of a Mortgage Broker is that they usually have a portfolio of several banks and other commercial financial lenders that they prefer to work with and know their different home loan products in detail. A choice.
- You should ask about which companies your broker represents, mine was happy to tell me all his different places that he uses, no worries.
- The broker can listen to your financial summary and life situation and then sort through their list to see which product will most likely match you.
- The broker wants you to get a home loan because they want their commission. This means they will make sure you are well prepared in advance because it is best to get approval with your first application.
- You can get ongoing financial advice from a Mortgage Broker but you are the one who makes the final decision about whether you use them or not and once you are ready to apply for a loan, you can pick the way you want to go.
- The Mortgage broker handles all the financial issues with the bank, they get you to fill in the application (guiding you through it) and they submit it to the bank. They are listed as your agent and any time you wish to change your loan details in the future you contact your broker. You can also contact the bank directly but your broker does keep an ongoing relationship with you and can explain things as you go.
I rang the Mortgage broker several times over the next 6 months to update them on our situation and to gather more information about how to get myself financially prepared. He was always friendly and helpful and never put me under any pressure of any kind.
I would recommend that you choose a broker that is personally recommended to you. My broker does not advertise, he gets work through word of mouth. My friend was happy to recommend him to me because he did a great job and we are the same.
So, start saving.... check your credit history.... speak to a mortgage broker to get a handle on your current situation and to see if you are close to your goal...
Other tips to follow....... I will talk to you all next year, Manuia te Tausaga Fou!
Monday 30 December 2013
Sunday 29 December 2013
Helpful Financial Tips - Credit History
One of my friends gave me detailed tips about how to prepare ourselves and I will share these below.
The biggest tip is that I had to prepare us financially before we could even apply for a home loan. If you prepare several months in advance, you will ultimately save time and make loan approval more likely.
This is because the best scenario is that you get approval for a home loan the first time you apply! If you apply several times and get knocked back because you were not ready, not prepared properly, then that puts a black mark against your name and makes it harder to apply the next time.
Saving for a deposit is important but it is really only the very first step. As you check off a step, you just methodically plod along to the next step:
SAVING DEPOSIT
1. Able to pay regular bills and still put aside 'something' (no matter how big or small) into your savings account most weeks and mostly leave it there without dipping straight back in :)
CREDIT HISTORY
2. The first thing for financial preparation that you should look at is your Credit History, or Credit Rating. This is one of the first things the bank will look at to see your 'Credit Reliability' when considering whether to give you a loan or not.
You are allowed to request a copy of your own file and it is good to do this, to see what the bank will potentially see. You can request a free copy of your personal 'Credit Report'. I got my credit report from VEDA [http://www.mycreditfile.com.au/home/free-credit-file.dot], I put in a request and provided the requested personal identification. I waited approx. 1 week and then got email notification with my password protected file for download.
This is a pretty big step in preparing yourself and I will go into it in detail because it was not really explained to me and I had to figure out what it all meant, once I got my actual Credit Report.
This credit history is held by a central agency a 'National Credit Reporting Agency', there are 3 of these in Australia [http://www.oaic.gov.au/privacy/privacy-topics/credit-and-finance/how-do-i-get-a-copy-of-my-credit-report]. Companies can submit your personal credit data to these agencies and other companies and individuals can access it upon request. I think the data is kept on your file for 5 years.
This credit data can be a notation about any loan you may have applied for from a Commercial Credit Companies in the past 5 years. Each application is noted, regardless of whether they were successfully finalised and paid out to you, or not. This means that even if you did not proceed with, or were refused a particular loan, it will be noted against your name as your 'credit history'.
Companies can also lodge negative data about your credit history on this file, if you did not pay a particular bill on time (credit default), they can send that information to be added to your credit history file. Other public record information like Bankruptcies and Court Orders are also kept on this file.
Your personal credit file can be deceptive because it is simply a list of financial information about potential credits against your name. It does not show positive information about your repayment history. It can potentially paint a grim and somewhat false picture of your current financial situation.
Some examples:
- You are considering taking out a personal loan for whatever reason and you put in several online applications, to several different financial institutions, just for information about whether you may be successful or not but you do not follow through, you do not get the cash from the bank. Every one of those applications are listed on your credit file, it does not record any data about whether the money was paid out, or not. So, someone looking at that credit history information may think that you were potentially approved for every application and you actually have 10 personal loans, even though you don't have any!!
- The above example is also true for applications for a home loan. This is why you want to be financially prepared before putting in ANY applications because if you are refused because you are not ready, it may make it harder to be successful again once you are ready.
- You have a credit default listed against your name because you did not pay a bill. You have since repaid the bill to the original financial company and no longer owe any money. The credit history file will still show that credit default and will not record that you repaid it. It will stay on your file for 5 years.
- Another oddity is that if you have not applied for any loans or had any financial data lodged against you personally, you will have no credit file. This should be good right? Not necessarily because you do not exist when the bank looks and this could also potentially mean you are a credit risk because you have not been approved for credit previously..... LOL catch 22!
Do not worry if any of the above is on your credit file because if you know what the bank will see, you will be able to prepare in advance for any potential questions.
If you have repaid a bill for example and it is still listed on your credit report, you can contact the company who listed your default in the first place. You can ask them to remove your credit default listing but even if they refuse, they should be able to provide a letter that states that you have repaid the default bill in total. That letter etc. could be submitted to the bank with your home loan application.
It is important to keep your credit history clean in the lead up to a home loan application.
When you are finally ready to apply for a home loan but you get knocked back the first time because your deposit is not big enough, or something like that but everything else is fine. You should wait another few months (maybe even 6 months) and keep plodding on saving more and increasing the deposit you have accumulated. Then apply again and even though you already have a large loan listed on your credit history, you can explain why (especially if you re-apply to the same bank) and they will likely accept it. However, if you went crazy and made 6 different applications after the first one was refused and still got knocked back for the same reason, it will be a lot harder when you try to reapply 6months later. You will look desperate for one and they will also not know if you did get approval..... Worst case senario is that you have to wait several years before you can try again for another home loan, even though you are actually in a great financial position!!!!
The biggest tip is that I had to prepare us financially before we could even apply for a home loan. If you prepare several months in advance, you will ultimately save time and make loan approval more likely.
This is because the best scenario is that you get approval for a home loan the first time you apply! If you apply several times and get knocked back because you were not ready, not prepared properly, then that puts a black mark against your name and makes it harder to apply the next time.
Saving for a deposit is important but it is really only the very first step. As you check off a step, you just methodically plod along to the next step:
SAVING DEPOSIT
1. Able to pay regular bills and still put aside 'something' (no matter how big or small) into your savings account most weeks and mostly leave it there without dipping straight back in :)
CREDIT HISTORY
2. The first thing for financial preparation that you should look at is your Credit History, or Credit Rating. This is one of the first things the bank will look at to see your 'Credit Reliability' when considering whether to give you a loan or not.
You are allowed to request a copy of your own file and it is good to do this, to see what the bank will potentially see. You can request a free copy of your personal 'Credit Report'. I got my credit report from VEDA [http://www.mycreditfile.com.au/home/free-credit-file.dot], I put in a request and provided the requested personal identification. I waited approx. 1 week and then got email notification with my password protected file for download.
This is a pretty big step in preparing yourself and I will go into it in detail because it was not really explained to me and I had to figure out what it all meant, once I got my actual Credit Report.
This credit history is held by a central agency a 'National Credit Reporting Agency', there are 3 of these in Australia [http://www.oaic.gov.au/privacy/privacy-topics/credit-and-finance/how-do-i-get-a-copy-of-my-credit-report]. Companies can submit your personal credit data to these agencies and other companies and individuals can access it upon request. I think the data is kept on your file for 5 years.
This credit data can be a notation about any loan you may have applied for from a Commercial Credit Companies in the past 5 years. Each application is noted, regardless of whether they were successfully finalised and paid out to you, or not. This means that even if you did not proceed with, or were refused a particular loan, it will be noted against your name as your 'credit history'.
Companies can also lodge negative data about your credit history on this file, if you did not pay a particular bill on time (credit default), they can send that information to be added to your credit history file. Other public record information like Bankruptcies and Court Orders are also kept on this file.
Your personal credit file can be deceptive because it is simply a list of financial information about potential credits against your name. It does not show positive information about your repayment history. It can potentially paint a grim and somewhat false picture of your current financial situation.
Some examples:
- You are considering taking out a personal loan for whatever reason and you put in several online applications, to several different financial institutions, just for information about whether you may be successful or not but you do not follow through, you do not get the cash from the bank. Every one of those applications are listed on your credit file, it does not record any data about whether the money was paid out, or not. So, someone looking at that credit history information may think that you were potentially approved for every application and you actually have 10 personal loans, even though you don't have any!!
- The above example is also true for applications for a home loan. This is why you want to be financially prepared before putting in ANY applications because if you are refused because you are not ready, it may make it harder to be successful again once you are ready.
- You have a credit default listed against your name because you did not pay a bill. You have since repaid the bill to the original financial company and no longer owe any money. The credit history file will still show that credit default and will not record that you repaid it. It will stay on your file for 5 years.
- Another oddity is that if you have not applied for any loans or had any financial data lodged against you personally, you will have no credit file. This should be good right? Not necessarily because you do not exist when the bank looks and this could also potentially mean you are a credit risk because you have not been approved for credit previously..... LOL catch 22!
Do not worry if any of the above is on your credit file because if you know what the bank will see, you will be able to prepare in advance for any potential questions.
If you have repaid a bill for example and it is still listed on your credit report, you can contact the company who listed your default in the first place. You can ask them to remove your credit default listing but even if they refuse, they should be able to provide a letter that states that you have repaid the default bill in total. That letter etc. could be submitted to the bank with your home loan application.
It is important to keep your credit history clean in the lead up to a home loan application.
When you are finally ready to apply for a home loan but you get knocked back the first time because your deposit is not big enough, or something like that but everything else is fine. You should wait another few months (maybe even 6 months) and keep plodding on saving more and increasing the deposit you have accumulated. Then apply again and even though you already have a large loan listed on your credit history, you can explain why (especially if you re-apply to the same bank) and they will likely accept it. However, if you went crazy and made 6 different applications after the first one was refused and still got knocked back for the same reason, it will be a lot harder when you try to reapply 6months later. You will look desperate for one and they will also not know if you did get approval..... Worst case senario is that you have to wait several years before you can try again for another home loan, even though you are actually in a great financial position!!!!
Saving Tips and How to Know you might be ready!
I promised to share some tips from my house owner friends told me:
Number 1 tip was ‘how to know you are ready to consider a home loan’?!
A) You are able to pay your
regular utility and rental bills.
B) You are able to
pay for groceries and other essentials.
C) You are able to pay for
A) and B) and still put aside some savings on a regular basis (no matter how
small).
My personal experience of saving is that it is all about ‘being
mindful’ (as my friend studying psychology would say), more than restriction
(like a diet).
My last post sounded like we live as paupers with garbage for furniture
and clothes. That is far from the truth,
we have very nice furniture, mostly new clothes and a good life in general and do not
miss out at all.
We also do have fluid funds available to buy gifts and meet other social
obligations when we want!
However, Too much of anything is bad for anyone… so you cannot live too
much in the future, or the past because ultimately we live in the ‘here and
now’, the present. However, too much present
is also not good just because you never know your own future. ‘Moderation is key’ as they say!
So my own savings plan means that I allow my kids and family to enjoy
life and not be too restricted but at the same time putting something away
every week (just in case)!
What do I mean exactly? I am
more organised and boring in general LOL..
Not that the rest of the family may realise… We still go on family holidays, but I book
them many months in advance to take advantage of discounts and also the opportunity
to pay them off over many months in advance (like lay-by).
Camping holidays are a good option for families (kids love tents!), as
are beach camping ground cabins and youth hostels (yes, we have used all of
these as a family!). Driving yourself instead of catching a plane, or train, or hiring a car also saves money but requires extra planning.
The kids still have many after school activities and the chance to try
new things…. My kids still have birthday
parties and all the other usual celebrations during the year, they do not miss
out.
However, I choose for them to go to the community centre for gymnastics
because it costs $10 / 2 hours, instead of a more expensive option. And they are in Cubs, another $10/ weekly
session activity. We also attend the
free Salvation Army Hip Hop dance classes, open to everyone. The Cub camps are also cheap and heaps of
fun! We are also lucky to live in
Ipswich because they have a fantastic school holiday free and fun program. This means that the kids can try lots of
different types of sports programs and enjoy art and literature and theatre
during the school holidays, all for free, you just have to book online in
advance!
You also need the support of family...
My Parents give their Grandchildren clothes for birthdays and every
other occasion. This saves our immediate
family thousands of $ every year and is no small gift. You could also suggest your extended family/
friends offer to pay for activity fees (like 1 term of swimming lessons)
instead of buying toys, or even buy school year necessities, or art and craft
supplies (kids really are happy with any gift!). Toys are important for kids but there is a cut-off
point where they just become excessive.
Another simple way to save is to substitute name brands for generic
brands (food, medicine, cosmetics). I do
buy name brands for some products where I really love the taste, or the quality
etc. However, I substitute for the
cheaper brand whenever I can! Quality
can sometimes make up for initial cost, especially over time… If it lasts and
still works after several years for example.
However, generic name medicines and some food products (like diced
tomatoes) really do not matter. This you learn through experience because the
retail market is constantly changing.
Before I had kids, I was able to stick to a strict grocery shopping
budget. In a perfect World (post kids) I
would write a list of what meals we are going to eat for the week and a
corresponding grocery list and I would buy only what is on the list. That would definitely save money and stop
impulse purchases. That is just to hard
with the kids in tow (ain’t happening!) but, I do try to make a basic list in
my mind of weekly meals and then shop at cheaper supermarkets like Aldi first
before I buy the extra groceries at the more expensive Woolworths and Coles
supermarkets etc. I also find that if
you also shop at fruit shops and butchers, you can get great deals on meat and
fruit/ veges. I have friends who buy
online so that in theory would stop impulse buying.
The best savings plan I can share though is ‘Direct Debit’!!!! I decide in advance what I need to pay and
when and I program this via online banking.
I organise with the electricity and phone companies to pay bills in
instalments without penalty whenever possible.
I also direct debit our weekly savings.
Then every week, I wait 1 day after we get paid for the week/ or
fortnight for all these debits to come out of our bank and then the leftover is
our ‘fun money’ LOL… Well not all fun
really, ‘the worker’ in our family lives on a weekly allowance for normal
weekly expenses and then whatever is left again after that is ‘grocery’ money
and it dictates how much we have for food and fuel.
We also restrict out family outings so we go to free venues like parks
and community events whenever possible.
We also wait and rent recent release movies, instead of going to the
cinema. A trip to the cinema for 2
adults and 3 kids can end up costing $60 plus popcorn etc. but renting a new
release for the family is less than $7.
We also buy junk food and go to Maccas for a family meal instead of
eating out… We will do the real deal,
family trip to the movies or date to a real restaurant maybe once or twice a
year only! We do not subscribe to Foxtel
etc. although I do try to be open to long term packages and plans.
That is savings, it is not pretty or glamorous but it gets results and worked for us J I will get into the nitty gritty of ‘how to
prepare yourself for a home loan’ next post!
Friday 27 December 2013
Decision Made, What Next?!
Great, so I finally decided we were going to try to buy our own home sometime in the near future.
First step, attitude adjustment.... we were not going to 'try' we were going to 'do it' successfully :)
How did I start? Well after I had my 'moment of clarity' back in 2006, I started to casually and randomly check out house prices around our area and other suburbs where I have lived previously. The internet is an amazing tool and I think it has a lot to do with our final success.
I did not have to worry about finding time out of my day to go and look at property, I could just have a quick squiz online in my spare moments, usually late at night when the kids were asleep. I did not look a lot but I had a vague idea of what was happening with the housing market.
I mainly looked at houses in those suburbs that I have lived in because I had a fair idea of the suburb position in relation to the city, to the shopping, public transport and other facilities etc. of the area, as well as what types of houses and landscape, also the general social perception of different suburbs. I understood what you were getting, where and it helped me to make sense of the different property prices.
I should probably mention at this point that I have personally been renting for a long time, ever since I left home aged 17 years. I added it up one day and worked out that I have resided in 12 different homes and I have rented with 26 different people!!!!
This was across 4 different town/ cities in Australia but in Brisbane/ Ipswich in particular, I have rented in 7 different Southern and Western suburbs. I have never lived on the North side of Brisbane but I do have friends who live there.
In 2006, we were privately renting directly from the landlord not through a real estate. We were only paying $190/ week until late 2009, when the landlord decided they wanted to move back into their own property. Fair enough but I got a real shock when I started looking around for a new place to rent!!!!
I quickly realised that most basic rentals, similar to our previous home were now being rented for $270- $290/ week and the newer homes were $300+
I decided to 'treat' us by applying for newer and fancier homes in the upper rental range around $310/ week. This is because I knew we were planning to buy a home in the near future and I also knew that any home we bought would be pretty basic, to fit in our price range :) I figured it could not hurt to live in a very nice place for awhile and as a practical test I wanted to see if we could handle paying a higher rent and still survive financially.
At this same time, rentals in other suburbs I had lived in previously were closer to $350 - $450 per week for the same kind of houses.
I amped up my internet searching for different properties and after 1 year of steadily checking and dreaming :), I started to get an idea of trends in the housing market and I had started to narrow down the areas that we were likely to be able to buy our first home.
We had been living in our new rental for 1 year, when the 30 year floods hit Brisbane in 2011. That decision to treat ourselves then turned out to be a very good decision for a totally unexpected reason! I noted that all the rental properties in the $270 range that I had considered in my previous search went under in the floods! I mean, completely under too... Going around looking at the devastation, I could not even see the roof of several of them. The only good thing to come out of the floods, is that I got to see first hand which areas were prone to flooding and how bad it could be.
After the floods, housing prices in many places across Brisbane and Ipswich started to come down rapidly (not surprisingly), the interest rates were getting extremely low and I knew we were rapidly approaching the best time for my little family to buy.
So it is one thing to check out the housing market but you need MONEY to buy right?! I had some shares that I bought before I was married and even though I had sold some of them to finance us when needed, I held on to 1000 of my best performing shares. The value of those shares took a battering in the GFC, in 2004 they were worth $18 each but in 2010 they dropped to $5 each.
I had been saving whenever I could. Nothing huge $50/ week for the last couple of years. Saving is hard though because there is always some bill to pay and my savings fund went up and down at different times of year. Sometimes, I could only afford to save $10/ week but I made sure I saved 'something' each week.
The Government introduced a new savings plan 'first home saver account', where they would match your savings $ for $ if you opened up an account only for home purchase. This sounded great, except that you could only spend that money on buying a home. My savings were more fluid than that, I have a family and sometimes you just have to crash your savings account to pay for something they need!
I opened an online ING account. This was good because it had no card and it took 1 day to transfer the funds across, so you had time to think about whether you really wanted to spend the money or not. It also had a relatively high interest rate and it was easy to manage the account.
I also tried to resist temptation whenever possible. We had a couple of small televisions, when everyone else seemed to have massive screens. I paid these off via 'lay-by' over several months, so that we owned it outright before we brought it home. I also put the kids Christmas gifts on lay-by, going to the June toy sales. I resisted buying expensive electronic equipment (even though it would have been nice to have). I made what I had last.
I also allowed myself to accept gifts of second hand furniture and goods which friends and family randomly offered to give away. This can be really hard on your pride but the longer term goal was worth it! FREE is not a dirty word! All our furniture was old and second hand and a lot of my clothes the same. Older but not dirty! Still clean and nice.
I even went around during the Council collections when people put their unwanted furniture and other rubbish out on the footpath. The Council just crushes this stuff in their garbage trucks and it is destroyed. This means that most people put their stuff out 1 week early and they are happy for anyone to come and take whatever they like from the pile. If you go to the 'richer' suburbs, they often throw away furniture which is still nice, some of their 'rubbish' was nicer than what we already had in our home LOL. One time I collected a dryer from the footpath, I took it to a small repair shop and $95 later, they had serviced it and it still works fine 2 years later :)
I also resisted reading the many sales catalogues that came to our home. I only allowed myself to read them if we were looking for something in particular. You will always find something you like in a catalogue, so I found the best way to avoid temptation, is to just throw them in the bin straight from the mailbox!
All these things to save money I had figured out on my own but how to translate this into being able to get a home loan from the bank was a mystery????! I figured my current savings plan was going to take me 50 years to save up the deposit!
I started to talk to my friends who owned their own homes, to ask them what they did and how they went about it. I will share what they told me in my next post :)
First step, attitude adjustment.... we were not going to 'try' we were going to 'do it' successfully :)
How did I start? Well after I had my 'moment of clarity' back in 2006, I started to casually and randomly check out house prices around our area and other suburbs where I have lived previously. The internet is an amazing tool and I think it has a lot to do with our final success.
I did not have to worry about finding time out of my day to go and look at property, I could just have a quick squiz online in my spare moments, usually late at night when the kids were asleep. I did not look a lot but I had a vague idea of what was happening with the housing market.
I mainly looked at houses in those suburbs that I have lived in because I had a fair idea of the suburb position in relation to the city, to the shopping, public transport and other facilities etc. of the area, as well as what types of houses and landscape, also the general social perception of different suburbs. I understood what you were getting, where and it helped me to make sense of the different property prices.
I should probably mention at this point that I have personally been renting for a long time, ever since I left home aged 17 years. I added it up one day and worked out that I have resided in 12 different homes and I have rented with 26 different people!!!!
This was across 4 different town/ cities in Australia but in Brisbane/ Ipswich in particular, I have rented in 7 different Southern and Western suburbs. I have never lived on the North side of Brisbane but I do have friends who live there.
In 2006, we were privately renting directly from the landlord not through a real estate. We were only paying $190/ week until late 2009, when the landlord decided they wanted to move back into their own property. Fair enough but I got a real shock when I started looking around for a new place to rent!!!!
I quickly realised that most basic rentals, similar to our previous home were now being rented for $270- $290/ week and the newer homes were $300+
I decided to 'treat' us by applying for newer and fancier homes in the upper rental range around $310/ week. This is because I knew we were planning to buy a home in the near future and I also knew that any home we bought would be pretty basic, to fit in our price range :) I figured it could not hurt to live in a very nice place for awhile and as a practical test I wanted to see if we could handle paying a higher rent and still survive financially.
At this same time, rentals in other suburbs I had lived in previously were closer to $350 - $450 per week for the same kind of houses.
I amped up my internet searching for different properties and after 1 year of steadily checking and dreaming :), I started to get an idea of trends in the housing market and I had started to narrow down the areas that we were likely to be able to buy our first home.
We had been living in our new rental for 1 year, when the 30 year floods hit Brisbane in 2011. That decision to treat ourselves then turned out to be a very good decision for a totally unexpected reason! I noted that all the rental properties in the $270 range that I had considered in my previous search went under in the floods! I mean, completely under too... Going around looking at the devastation, I could not even see the roof of several of them. The only good thing to come out of the floods, is that I got to see first hand which areas were prone to flooding and how bad it could be.
After the floods, housing prices in many places across Brisbane and Ipswich started to come down rapidly (not surprisingly), the interest rates were getting extremely low and I knew we were rapidly approaching the best time for my little family to buy.
So it is one thing to check out the housing market but you need MONEY to buy right?! I had some shares that I bought before I was married and even though I had sold some of them to finance us when needed, I held on to 1000 of my best performing shares. The value of those shares took a battering in the GFC, in 2004 they were worth $18 each but in 2010 they dropped to $5 each.
I had been saving whenever I could. Nothing huge $50/ week for the last couple of years. Saving is hard though because there is always some bill to pay and my savings fund went up and down at different times of year. Sometimes, I could only afford to save $10/ week but I made sure I saved 'something' each week.
The Government introduced a new savings plan 'first home saver account', where they would match your savings $ for $ if you opened up an account only for home purchase. This sounded great, except that you could only spend that money on buying a home. My savings were more fluid than that, I have a family and sometimes you just have to crash your savings account to pay for something they need!
I opened an online ING account. This was good because it had no card and it took 1 day to transfer the funds across, so you had time to think about whether you really wanted to spend the money or not. It also had a relatively high interest rate and it was easy to manage the account.
I also tried to resist temptation whenever possible. We had a couple of small televisions, when everyone else seemed to have massive screens. I paid these off via 'lay-by' over several months, so that we owned it outright before we brought it home. I also put the kids Christmas gifts on lay-by, going to the June toy sales. I resisted buying expensive electronic equipment (even though it would have been nice to have). I made what I had last.
I also allowed myself to accept gifts of second hand furniture and goods which friends and family randomly offered to give away. This can be really hard on your pride but the longer term goal was worth it! FREE is not a dirty word! All our furniture was old and second hand and a lot of my clothes the same. Older but not dirty! Still clean and nice.
I even went around during the Council collections when people put their unwanted furniture and other rubbish out on the footpath. The Council just crushes this stuff in their garbage trucks and it is destroyed. This means that most people put their stuff out 1 week early and they are happy for anyone to come and take whatever they like from the pile. If you go to the 'richer' suburbs, they often throw away furniture which is still nice, some of their 'rubbish' was nicer than what we already had in our home LOL. One time I collected a dryer from the footpath, I took it to a small repair shop and $95 later, they had serviced it and it still works fine 2 years later :)
I also resisted reading the many sales catalogues that came to our home. I only allowed myself to read them if we were looking for something in particular. You will always find something you like in a catalogue, so I found the best way to avoid temptation, is to just throw them in the bin straight from the mailbox!
All these things to save money I had figured out on my own but how to translate this into being able to get a home loan from the bank was a mystery????! I figured my current savings plan was going to take me 50 years to save up the deposit!
I started to talk to my friends who owned their own homes, to ask them what they did and how they went about it. I will share what they told me in my next post :)
We Got There!
We just bought our first home *insert smiley face*!
Amazing!.... hard to believe we made it and since we seem to have had a lot of curious people in our life wondering how we managed it, I decided to write a blog about our journey.
I know to most people it seems like an everyday, normal thing to do... Not overly hard, or anything to crow about... Well they don't have to read my blog do they ;)
I have noticed that we are an older couple in the first home market. I never wanted to buy a house. I saw it as only being a gigantic debt and not 'your biggest asset', as realty agents tend to spruik.
I do still view it as a massive debt, because ultimately the bank owns it and I now just effectively pay them rent (Rent to Own), instead of a private landlord. There are however several benefits or 'assets' if you like to living in our own home.
I have waited a long time to get to a mental place where it seemed like a good idea. This is mostly because of the changing real estate market in Australia, Brisbane in particular.
It used to be a lot cheaper to rent, than to buy! You could live in a very nice house and pay less on a weekly basis, than a mortgage repayment for the privilege. You were only locked into a short term contract and could move whenever you wanted, with minimal fuss, or cost to you personally. Originally you did not have to pay for water, or rates etc. It was a good option.
I first started thinking about buying my own home for real in 2006 but I did not really do anything about it for several years.... I had an epiphany one day as I watched our new neighbours move in. It was an old lady and she moved all her pot plants and just all her accumulated 'stuff' and filled the yard of the house and made a temporary structure in the back of the house to be able to fit everything. It just struck me as being really sad, that you would still have to think about moving house and dealing with real estates and temporary contracts, when you were in your 70's. I thought about my Parents and I imagined how stressful it would be for them and us, if they had to do the same!
The Global Economic Crisis hit the housing market and consumer confidence went down. The home loan interest rates started to go down as incentive for people to enter the housing market. House prices started to decrease or at the very least stall.... The rents started just climbing and climbing because more people wanted to rent and less people wanted to buy. Well that is my own understanding, interpretation and basic summary of the situation, I am sure economic gurus have a fancy way of saying all this?!
Then in the rental situation, they started to charge you for any extra water usage as well. The tide had started to turn, the costs of renting were adding up!
I realised that it was getting close to a point where I might as well think about buying my own home because rents were approaching a point where they were higher than the cost of mortgage repayments!
How did this affect us as renters?! We were living in a Brisbane suburb but then moved out to the inner edge of Ipswich and then moved again a bit further out each time. This is because you could rent a bigger and relatively newer house in Ipswich for the same price, or cheaper than a smaller, older and with less mod cons in Brisbane. The closer to the Brisbane CBD, the higher the rents, no matter how crap the housing.
To directly compare, we could rent an 8 yr old single level brick house in Ipswich: 4 bedrooms, 2 bathrooms, 2 toilets, 2 living spaces plus kitchen, nice kitchen with modern appliances and dishwasher, built-in cupboards, double lock up garage with powered roller door, covered pergola area, with good insulation, air-conditioning, fans, security screens, heat pump hot water system for $310/ week. You would pay almost exactly the same price for a small 20-40 yr old wooden house, in a not so desirable (interpretation 'cheaper') suburb of Brisbane: 3 bedrooms, 1 bathroom, 1 toilet, 1 open plan small living space with kitchen, no built-in cupboards, basic kitchen, no lock up garage, no air-conditioning, no fans, no security screens.
However even that situation started changing in the end and I was glad that I had already started my plan to buy our own home and ramped it up over the 3 years we lived there.
At our last rental house, they were raising the rent by $10 every 6 months. They were also charging us for all water costs. The landlord paid only the standard rate for sewerage and water connection to the property each water bill.
In addition to this, the managing real estate agent was just a constant pain in the backside. The minimum time frame between rental inspections set by the Rental Tenancy Authority is 3 months and our real estate would set their inspections for every 3 months on the dot. They were not pleasant about it either, giving you a time frame of between 9 am and 12 pm that they may visit your property. They also had the nasty habit of not giving you the minimum notice about pending inspections. They always posted a letter about the upcoming inspection, on the start day of the notice period and I often did not receive it until the day before the inspection and sometimes, the morning of said inspection.... I notified them of this many times but was ignored....
I always liked to be present at these inspections and I had always been an excellent tenant. One time I asked if they could set a specific time to come to my home so that I could ensure I was there and I got the 3rd degree.... "Why are you complaining about this?", "Should we be worried, have you done something to the property?", "If you are not there when we arrive we will just let ourselves in with our own key, we are legally allowed to do this and we will notify the authorities if the property is damaged"... Huh?! I just wanted to be in my home when a stranger came to visit!!!!
They did let themselves in too, they did not even knock, just used their own key. One time, I was in the garage/ laundry (at the front of the home) waiting for the inspection and then when I went into the house, I was surprised to find a stranger standing in our lounge room. No apology was given. They also took pictures of our kitchen sink and all our living spaces every time they conducted an inspection and regardless of how clean it was! A total invasion of privacy.
Add to this all the other 'maintenance inspections' that they organised several times throughout the year. These kinds of inspections only require 1 days notice.. They had to inspect the smoke alarms and for termites, not to mention other little bits and pieces they decided needed to be checked throughout the year and also when stuff broke down etc.....
I was totally fed up with this constant intrusion in the end... I was living in a nice house with security screens, window locks and deadlocks and it was all obsolete because strangers had their own keys and could let themselves in whenever they bloody liked!!!
So this is supposed to be a blog about our first home but it seems to have turned into an "I hate real estate property managers" blog :)... I guess it is relevant because it was a big part of why we decided to buy our own home!
When we did move forward with our dream it had reached a point with rents once again rising where we lived, so that we had to make the following decision:
1. Buy our own home around the suburb we were currently renting in that would have us paying roughly the same, or less weekly mortgage repayments than our previous rent.
2. Move further away from where we worked and closer to Ipswich, in order to rent a cheaper nice house.
3. Consider accepting a more basic home to rent around the suburb we currently lived in, without any nice mod cons and this would bring extra costs in itself (ie. buy wardrobes etc.).
We were amazed and very proud to be able to pull off option 1.
Amazing!.... hard to believe we made it and since we seem to have had a lot of curious people in our life wondering how we managed it, I decided to write a blog about our journey.
I know to most people it seems like an everyday, normal thing to do... Not overly hard, or anything to crow about... Well they don't have to read my blog do they ;)
I have noticed that we are an older couple in the first home market. I never wanted to buy a house. I saw it as only being a gigantic debt and not 'your biggest asset', as realty agents tend to spruik.
I do still view it as a massive debt, because ultimately the bank owns it and I now just effectively pay them rent (Rent to Own), instead of a private landlord. There are however several benefits or 'assets' if you like to living in our own home.
I have waited a long time to get to a mental place where it seemed like a good idea. This is mostly because of the changing real estate market in Australia, Brisbane in particular.
It used to be a lot cheaper to rent, than to buy! You could live in a very nice house and pay less on a weekly basis, than a mortgage repayment for the privilege. You were only locked into a short term contract and could move whenever you wanted, with minimal fuss, or cost to you personally. Originally you did not have to pay for water, or rates etc. It was a good option.
I first started thinking about buying my own home for real in 2006 but I did not really do anything about it for several years.... I had an epiphany one day as I watched our new neighbours move in. It was an old lady and she moved all her pot plants and just all her accumulated 'stuff' and filled the yard of the house and made a temporary structure in the back of the house to be able to fit everything. It just struck me as being really sad, that you would still have to think about moving house and dealing with real estates and temporary contracts, when you were in your 70's. I thought about my Parents and I imagined how stressful it would be for them and us, if they had to do the same!
The Global Economic Crisis hit the housing market and consumer confidence went down. The home loan interest rates started to go down as incentive for people to enter the housing market. House prices started to decrease or at the very least stall.... The rents started just climbing and climbing because more people wanted to rent and less people wanted to buy. Well that is my own understanding, interpretation and basic summary of the situation, I am sure economic gurus have a fancy way of saying all this?!
Then in the rental situation, they started to charge you for any extra water usage as well. The tide had started to turn, the costs of renting were adding up!
I realised that it was getting close to a point where I might as well think about buying my own home because rents were approaching a point where they were higher than the cost of mortgage repayments!
How did this affect us as renters?! We were living in a Brisbane suburb but then moved out to the inner edge of Ipswich and then moved again a bit further out each time. This is because you could rent a bigger and relatively newer house in Ipswich for the same price, or cheaper than a smaller, older and with less mod cons in Brisbane. The closer to the Brisbane CBD, the higher the rents, no matter how crap the housing.
To directly compare, we could rent an 8 yr old single level brick house in Ipswich: 4 bedrooms, 2 bathrooms, 2 toilets, 2 living spaces plus kitchen, nice kitchen with modern appliances and dishwasher, built-in cupboards, double lock up garage with powered roller door, covered pergola area, with good insulation, air-conditioning, fans, security screens, heat pump hot water system for $310/ week. You would pay almost exactly the same price for a small 20-40 yr old wooden house, in a not so desirable (interpretation 'cheaper') suburb of Brisbane: 3 bedrooms, 1 bathroom, 1 toilet, 1 open plan small living space with kitchen, no built-in cupboards, basic kitchen, no lock up garage, no air-conditioning, no fans, no security screens.
However even that situation started changing in the end and I was glad that I had already started my plan to buy our own home and ramped it up over the 3 years we lived there.
At our last rental house, they were raising the rent by $10 every 6 months. They were also charging us for all water costs. The landlord paid only the standard rate for sewerage and water connection to the property each water bill.
In addition to this, the managing real estate agent was just a constant pain in the backside. The minimum time frame between rental inspections set by the Rental Tenancy Authority is 3 months and our real estate would set their inspections for every 3 months on the dot. They were not pleasant about it either, giving you a time frame of between 9 am and 12 pm that they may visit your property. They also had the nasty habit of not giving you the minimum notice about pending inspections. They always posted a letter about the upcoming inspection, on the start day of the notice period and I often did not receive it until the day before the inspection and sometimes, the morning of said inspection.... I notified them of this many times but was ignored....
I always liked to be present at these inspections and I had always been an excellent tenant. One time I asked if they could set a specific time to come to my home so that I could ensure I was there and I got the 3rd degree.... "Why are you complaining about this?", "Should we be worried, have you done something to the property?", "If you are not there when we arrive we will just let ourselves in with our own key, we are legally allowed to do this and we will notify the authorities if the property is damaged"... Huh?! I just wanted to be in my home when a stranger came to visit!!!!
They did let themselves in too, they did not even knock, just used their own key. One time, I was in the garage/ laundry (at the front of the home) waiting for the inspection and then when I went into the house, I was surprised to find a stranger standing in our lounge room. No apology was given. They also took pictures of our kitchen sink and all our living spaces every time they conducted an inspection and regardless of how clean it was! A total invasion of privacy.
Add to this all the other 'maintenance inspections' that they organised several times throughout the year. These kinds of inspections only require 1 days notice.. They had to inspect the smoke alarms and for termites, not to mention other little bits and pieces they decided needed to be checked throughout the year and also when stuff broke down etc.....
I was totally fed up with this constant intrusion in the end... I was living in a nice house with security screens, window locks and deadlocks and it was all obsolete because strangers had their own keys and could let themselves in whenever they bloody liked!!!
So this is supposed to be a blog about our first home but it seems to have turned into an "I hate real estate property managers" blog :)... I guess it is relevant because it was a big part of why we decided to buy our own home!
When we did move forward with our dream it had reached a point with rents once again rising where we lived, so that we had to make the following decision:
1. Buy our own home around the suburb we were currently renting in that would have us paying roughly the same, or less weekly mortgage repayments than our previous rent.
2. Move further away from where we worked and closer to Ipswich, in order to rent a cheaper nice house.
3. Consider accepting a more basic home to rent around the suburb we currently lived in, without any nice mod cons and this would bring extra costs in itself (ie. buy wardrobes etc.).
We were amazed and very proud to be able to pull off option 1.
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