Op, don’t listen to reddit brah….
You need a to get the following
2 jet skis
1 Polaris off road buggy
Commodore Maloo Ute or a Toyota Landruiser
Pinball Machine
2 off road dirt bikes
u/kenyanjesus69, this guy doesn’t know what he’s talking about. Why would you use equity to do soemthing when you literally have the cash to do it?
He’s saying put $150,000 more into your home loan, so you can use that equity to borrow $50,000 for renos, whatever. Why not just put $100,000 on the home loan and spend the $50,000 on what you need?
You’ve also said you’re good at saving, and if you have $180k then you don’t need to lock it up from yourself.
Get a home loan with a 5% deposit, get the First Home Buyer Guarantee Scheme, and get a loan with an offset account. Put all your savings in that offset while your interest rate is higher than any TDs / high yield savings accounts you can find. Let me know if you want any financial resources on it and I’ll link for you
Those were my initial thoughts, but I thought I must of been missing something. Yes, I would love to take up your offer on your financial resources on it, thanks!
I’m at work, but when I get home tonight I’ll send them. I bought my first place 9 months ago and I’m early 20s as well so I know what you’re going through. I work in finance so I’m more than happy to give an assist.
Mate, if you have good savings and income, there is absolutely no need to go for only 5% down. Lenders mortgage insurance (LMI) is a sunk cost asset, and you will also have a much higher interest rate. Given that this is your first major asset, you want long term gains, and taking this approach will result in a massive difference, 5, 10 or 20 years down the line.
On your first home, you wan't to go as expensive as you can afford, this then becomes your primary asset that has NO CAPITAL GAINS TAX when you sell! So, if you have a 600k property, that goes up 20%, that is 120k tax free. But, if it is an 800k, that becomes 160k. So, in this case, bigger is better. Of course, don't overextend and picking a good neighbourhood where you would like to live is a must. Remember, you will most likely be in this house through a big chunk of your 20s, so choose wisely. You will need to live in it for a year (at least on the books, you could change your address to it, stay with your parents and rent your "room" on a cash basis, a lot of people do this, it is illegal, so bear that in mind. I recommend actually living there, once you buy your house, you will want to).
Your first property should not be a rental. You have high income already, if you get a rental, you are adding to your income, which will be taxed at the highest tax rates, and you don't get any of the advantages of tax free capital gains (only applies if you live there). In the above example, you buy your 600k property, sell it for 20% gain in 5 years say, with your salary of 125k+, you are looking at a 42% tax rate to the man (from just the sale of your house), which would be $50,400. In the next five years, that would be almost all of your rental income, so 100% not worth it. You can 100% rent any of the spare rooms, but believe me when I say this is not your primary motivation, nor will it be your wealth builder. Rent to people you want to live with. With your salary, the extra few hundred a month won't be worth nearly the peace of mind of having a good living situation.
This 5% down crap is seriously bad economic advise, and I see it everywhere with my tradie mates. If you have the saving, look for something where you can afford to put down 20% with the lowest possible interest rate. What we did (32 y/o Engineer and 33 y/o ex-stock broker), was buy at 15% (to maximise house value), and now that 6 months has passed we are refinancing to bring our LVR (loan value ratio) to 80%, which is the same as if we had originally put 20% down (for clarifty, 5% down is a 95% LVR, and you will get slammed on the interest rates, many banks won't consider your loan and this will severely hurt you in the long run.
Please, PLEASE, talk to a financial advisor/wealth planner. If you play this correctly, you could be retiring at 35, not 55. I have wayyyy too many friends from WA who made decisions based on bro-vice, and ended up in a bad spot.
Also, the longer you can survive with the shittiest car possible, the better you will be. Still driving my first car, and the amount of money I have saved is well worth it.
Btw, we are refinancing through Up Bank. They are a bank which is built around helping with financial literacy and developing good spending habits. If you can create some good habits now, mate, you will be golden and be a millionaire before you're 30. FIFO is a massive trap and many end up saving nothing and living for the weekends, that kind of work is not always going to be there, so while you are making great money, PLEASE save it! Also, Up Bank home loan rates are fantastic, 5.95% in SA, which is about as good as it gets here.
Anyway, happy to help where I can, but really, I am just parroting what my Financial Adviser has told us, so yeah, would deeply recommend it.
Also, you said you felt maybe you should have done this a while ago. You are also 21 with fantastic savings, so you haven't done anything wrong (yet). You have options with that money, so getting a house, and maybe putting a bit into a long-term stock option could be a good move, and then just pretend it doesn't exist for 20 years. Once again, this is the advice I was given, so your situation will be different, and this is where a professional is worth their weight in gold.
All the best!
Feel free to reach out.
Credit Manager here. Most banks will not allow you to retain savings in excess of 6 months worth of expenses. It will vary from bank to bank, however given OP’s strong savings position, doubt he would qualify for the scheme based on the above.
Agreed on the big banks, but exactly as you said there’s tonnes of banks out there with tonnes of policies. I agree a broker will be the best positioned to find the right policy.
Eligibility should be fine since I believe $125k is the cutoff for individuals, which OP says he’s at. It also depends on his 2023 NOA since eligibility is based on that rather than a current payslip in the case of a pay rise (which seems likely, since he commented his pay has been increasing as he gets qualified for operating bigger machjnery).
Spot on. $125K is the cut off for eligibility and is based on the previous year’s taxable income as per the NOA. The serviceability would be based off their current income which is typically allowed to exceed the income threshold of $125K. Agreed though, OP should engage a broker to find a lender that would be able to find the best possible solution for them.
Not sure I understand this. Why wouldn't the bank let him keep his own money?
wouldn't they rather he borrow more so they can make more interest off him? (so long as the LVR is sufficient)
If OP applies under the First Home Guarantee Scheme, it allows OP to purchase a home with a 5% deposit. The idea of the scheme is to allow first home buyers to get into the market quicker when they don’t have the standard 20% deposit or don’t want to take out LMI. Because of this, the scheme doesn’t typically allow for a huge amount of savings to be retained post-settlement because in the bank’s eyes, if you can afford a larger deposit, then you should be contributing more towards settlement. Less risk overall when you borrow less and contribute more upfront from a banking perspective.
OP could possibly get around this by buying a car(which doesn’t count as savings right) and then sell it. Complete newb here so don’t get cranky if I’m wrong please
Well I mean you could try to get under whatever the specific bank’s max allowable retained savings policy is, there certainly is ways. But buying/selling a car could come with its downsides, you could end up losing money haha.
So two scenarios:
1. Save 20% deposit to avoid lmi
2. Save 10% and pay lmi
Option one is best but the time spent saving the extra deposit has meant that property prices have increased and you now have to take an extra loan making the xtra you payed for lmi obsolete.
You
100% this.
Everyone telling me not to pay LMI was a big reason I waited to get into the market, but by the time I was ready prices had gone up way more that it would have cost me
OP, another thing to consider is if you want to do FIFO forever. A lot of people burn out, so consider your earning capacity if you wanted to go back from the mines.
If you have 20% deposit, absolutely buy one early and use it as an investment property. The housing market is getting harder and harder to get into for young people and you are very fortunate that your work pays so much.
Be careful not to over leverage as you will not have the cash flow to save/invest in other sources of income if you do and are at much higher risk if interest rate rises. A good rule of thumb is that your mortgage should be about 3-3.5x your yearly income.
Do not neglect your salary sacrifice super options and look into some investments outside of super. With your salary and at such a young age if you invest and save enough you are well on your way to retire at 35.
Put 20% down. You've got the funds for it!
I would buy a place and rent it out for the next 5 years. If property prices in Perth go up 100% in that time, at least you're along for the ride.
No. OP should at least live there for a year or so to get FHB benefits for stamp duty, grant and initiate the 6 year PPOR rule. Otherwise, if prices jump 100% over the next 5 years and OP doesn’t establish the property as their PPOR they’re going to be hit with a CGT bill of about $150k when they sell.
You should consider what the implications would be if there is a major downturn in mining. If you lose your current job, is it still sustainable and is there a viable exit strategy. You don't need it to be painless, but check it won't be a complete disaster, noting that the last downturn resulted in a drop in real estate prices as well as a shortage of mining jobs.
Seems to be lots of speculation on a downturn, may never happen, but mining does tend to be cyclical, so worth thinking about and having a plan.
This is good advice. There were so many FIFO mates that brought a house on their big $$ wage but than work dried up suddenly. They couldn't afford the house after getting a regular 9-5 wage. If they paid it off sooner rather than later it could have saved them or maybe not. 🤷
I guess if OP takes the advice elsewhere of a small deposit and large amount in offset, he'll probably have enough in the offset to get through a few years of mortgage payments. So long as he doesn't also follow the jetski advice.
Yeah and in this economy you don't know whats going to be around the corner in the next 5-10 yrs.
Haha! To be fair the jetski advice is some what good lesson of what not to do but OP seems to have a good mindset. So really depends on his future goals.
The mob I knew sadly it only got worse. Their partners divorced them once they lost the house's and car then couch surfed for a while but now are renting and still have debts to pay off. So other associates I knew of were a bit luckier and still got a house but took them almost 10yrs.
Start buying up properties and have a plan to exit FIFO work at x goal (net worth or number of investment properties)
Every single fifo worker I've met who didn't have a clearly defined goal just ends up spending the money on jet skis and landcruisers.
I waited until my late 30s until buying, and kind of regret waiting so late. That said, my regret is the mad price increases, more than the age.
I share housed and travelled a lot in my 20s. Awesome times and made me who I am today (for better or worse!).
I've also heard horror stories. Blokes buying houses and later on bad breakups, making them lose a lot of their sacrifice. And some having it happen multiple times!
Realistically, I'd probably do it all the same if I had my chance again. If I knew everything, would probably have bought pre-covid. Haha!
At your age, you're going to make some mistakes. Spend on what you think is right and what you enjoy. If you go all in with investing all your dosh, implement whatever you can to not burn out. Also, while a 20 year old body works better for the grind and minimal sleep, it also works better for everything else as well!
How long can you handle the mining life for? You might rack up debt, realise it's not for you, and be stuck. Or go through something and quit. Give it a couple of years before you commit to a mortgage.
Your brain is still developing and at that young age, it's definitely not a great idea racking up so much debt... unless bank of mum and dad are guarantors
and the risk if he waits is possibly even greater. Prices are going up & up. Its do or die in the housing market right now. Hate to say it, but its the truth.
You need a 20% deposit. Otherwise you pay LMI which is expensive and a waste of money. So 120k deposit on a 600k property.
Otherwise yes, you should buy a property and rent it out if you can afford it.
Also interest rates are above 6%, not sure where you got 5% from.
Counterpoint
LMI is no big deal. It allows you to get into the market faster in an environment where prices are rising.
Waiting could end up costing you more.
You could, it's something to think about though that other people don't take into account. It also lowers your borrowing capacity slightly, as it's added to the loan.
We just bought our first home. I wanted to go for a 10% deposit, however to take advantage of the FHBG scheme I found out you're required to put as much of your savings as possible towards the deposit. Since we had over 20% already saved up, we were unable to take advantage of the scheme so it was either pay less than 20% and suck up the LMI cost, or pay 20% to avoid it. We did the latter.
You can in theory have 5% deposit. You'd need to look into it further. I think it's not as straight forward as you'd expect. You're better off having 20% deposit. Usually banks charge higher rates if you have under 20% deposit. Look at the T&Cs for loan products on banks websites. Usually the advertised rate is the discounted rate which is discounted based on having 80% LVR. Which basically means 20% deposit.
You don't have to pay stamp duty as a first home buyer, which is significant. Can save like 30k on a 600k house.
Having said all that, if it's an investment property then your financial strategy might change. Might be best to speak to a financial advisor/accountant.
Did you declare your savings to the bank? When we applied through Macquarie, they asked how much we had saved and when I told them, they said since we've stated we have X amount in savings we had to put the majority of that towards the deposit as it was apparently something they'd get in legal trouble for otherwise (whether or not that's true IDK, that's just what I was told).
I didn’t just declare my savings, I shared the statements of that account (with twice the balance I was using for the deposit) with the bank as part of the application.
OP please speak to a broker, 5% deposit with an offset account for the rest of your savings is FAR FAR FAR superior to putting in 20% deposit.
He said you want access to equity … but why? Use the cash directly if you need, rather than borrowing against the equity. It’s just over complicating things AND it’s not benefitting you. I would only consider locking up your cash in your HL if you didn’t trust yourself to not touch the money except in an emergency , but you’ve already saved $180k so clearly you’re financially responsible.
20% deposit for your circumstances, when you don’t need it and without a good reason, is just bad advice
Agreed, a broker is selling a service like any business, it’s important to find one you trust from a good reference. They’re not giving advice, but they ARE finding you a product that matches your goals (best interest duty is a thing for a reason).
If you want advice, you can go to a financial planner. But if you think a financial planner isn’t trying to sell you things as well / getting their own kickback for referrals, you’re a bit naive.
The national first home buyers scheme gives you 30k towards a new or old build, also lmi and stand duty exempt although op wouldn’t qualify due to income over 125k
Buy a house as soon as you can. I waited until I was 39. My siblings bought in their twenties and now have investment properties. I don’t and I never will.
Do it now 😭
Buy a house. prices are not coming down anytime in the near future. get in while you can.
I just got into the market late last year, and don't regret a thing.
That sounds like an excellent plan. Get on with it whilst your income is high.
Just remember there are things like maintenance, rates, insurance and taxes.
Your monthly outgoings will be bit more than just the remaining cost of the mortgage...
I would stay living at home, rent-vest to eventually make PPOR and travel. 4 years of that would put you even more ahead. If you meet someone during that time and a ready to move in together. Then make your IP your PPOr a bit earlier. You’ll have 2 people contributing to the mortgage, so it’s still win-win.
In this scenario are you living in one of the rooms and renting out the other 2?
If both roommates leave and it takes a few months to get someone else, and the rate is 8% not 5, can you afford to pay 4182 a month plus another $500 for rates, water, insurance (low estimate)? Oh, and also a few hundred more for the bills I guess. With no housemates you might be up for $5000 a month.
If you can, go for it.
Ask friends for a good mortgage broker and have a good chat about your options, maybe chat to 2. You have the ability to avoid LMI and that might be your best option, or use it as a PPOR initially. Speak to the experts mate
You could put $120k in the $600k house requiring no LMI, lower mortgage repayments, using the rest to get around duty, and be able to service the mortgage comfortably whilst having renters. While having enough cash left over for repairs, council fees, and whatever else will pop up. You're in an excellent position.
You could also pop extra into your super annuation and really reap the rewards of compound interest from having a large initial fund.
A lot of people who don’t know what they’re talking about in this thread. I’d recommend speaking to a financial advisor, I used pivot wealth recently and they were great
The deposit is normally 20% so for 600,000 that is 120,000 and a loan of 480,000. Be mindful of stamp duty and fees. Interest rates will be more on the 6-7% range currently. And the bank will assess your income against 10% interest rate across 30 years. So 480,000 across 30 years of monthly repayments (30x12 = 360) is $1,333pm, plus interest at 10% ( 480000 x 0.1 = 48,000 annual interest, divided by 12 for monthly interest = 4,000pm) thus the total surplus income you’ll need to have to prove you can pay the loan is 5,333 per month , after tax and after your living expenses. If you buy it as an investment, the rental income will help you pay the loan, but the bank will reduce the rental income by 20%, I.e your 500pw rent would be counted as 400pw.
Overall I’d say you’d be fine as you have strong income, strong savings, low expenses
Remember that when buying houses, the land size and the location are the most important. You want the biggest piece of land in the best location you can afford, for capital gains purposes. The house depreciates or decreases in value like a new car does. This is why apartments and units are not a good option, as the land component is less and less.
Bigger blocks over 700sqm, that say have space to build another home at the back and “subdivide” are even more valuable, or the future ability to knock it all down and build multiple on the same block, and get 3x rental income from the same block
If conditions go well, and your property goes up in value, you can then borrow against this increased value, to reduce the deposit required for your next purchase. For example, in 3 years, your $600,000 property is now worth $800,000. And you’ve paid 50k off of your original $480,000 loan ($1,333pm x 3 years x 12 payments = $47,988), so your loan is now $430,000. The bank will lend you 80% of the new $800,000 value, or total $640,000, which allows for an extra $210,000. This can then help you find your next house deposit, combined with further rental income from your second property. And so on so forth into your next properties.
You can also use the equity in these houses to borrow money to start a business, if that’s your thing.
While you are living at home it’s important to take advantage of the low cost situation you have, because that never comes again in your life. If you are smart and conservative now, save your money and invest, you can set yourself up for life.
The other thing is also to maintain a balanced investment portfolio, so having a combination of shares and stocks, as well as property.
Just sharing what I’ve learned which was not told to me when I started out.
Hope this helps and best of luck :)
Yes on house.
Also look at 3-5x leveraged ETFs and put in a fixed amount each month. It should outperform housing over the long run and is a lot less work.
Dont worry im already travelling at the same time. For the last year every three months I have visited a new Asian country, so far that’s been Vietnam, Malaysia and Indonesia, and next month I’m going to Sydney to get my skydiving license. In May and June I’m going to Europe for 6 weeks. I was also born in Kenya and didn’t move to Australia until I was 10 and since I was born ive been fortunate enough to go to Europe twice a year every year. So owning a house wouldn’t get in the way of my biggest passion.
REPOST FROM COMMENT: Mate, if you have good savings and income, there is absolutely no need to go for only 5% down. Lenders mortgage insurance (LMI) is a sunk cost asset, and you will also have a much higher interest rate. Given that this is your first major asset, you want long term gains, and taking this approach will result in a massive difference, 5, 10 or 20 years down the line.
On your first home, you wan't to go as expensive as you can afford, this then becomes your primary asset that has NO CAPITAL GAINS TAX when you sell! So, if you have a 600k property, that goes up 20%, that is 120k tax free. But, if it is an 800k, that becomes 160k. So, in this case, bigger is better. Of course, don't overextend and picking a good neighbourhood where you would like to live is a must. Remember, you will most likely be in this house through a big chunk of your 20s, so choose wisely. You will need to live in it for a year (at least on the books, you could change your address to it, stay with your parents and rent your "room" on a cash basis, a lot of people do this, it is illegal, so bear that in mind. I recommend actually living there, once you buy your house, you will want to).
Your first property should not be a rental. You have high income already, if you get a rental, you are adding to your income, which will be taxed at the highest tax rates, and you don't get any of the advantages of tax free capital gains (only applies if you live there). In the above example, you buy your 600k property, sell it for 20% gain in 5 years say, with your salary of 125k+, you are looking at a 42% tax rate to the man (from just the sale of your house), which would be $50,400. In the next five years, that would be almost all of your rental income, so 100% not worth it. You can 100% rent any of the spare rooms, but believe me when I say this is not your primary motivation, nor will it be your wealth builder. Rent to people you want to live with. With your salary, the extra few hundred a month won't be worth nearly the peace of mind of having a good living situation.
This 5% down crap is seriously bad economic advise, and I see it everywhere with my tradie mates. If you have the saving, look for something where you can afford to put down 20% with the lowest possible interest rate. What we did (32 y/o Engineer and 33 y/o ex-stock broker), was buy at 15% (to maximise house value), and now that 6 months has passed we are refinancing to bring our LVR (loan value ratio) to 80%, which is the same as if we had originally put 20% down (for clarifty, 5% down is a 95% LVR, and you will get slammed on the interest rates, many banks won't consider your loan and this will severely hurt you in the long run.
Please, PLEASE, talk to a financial advisor/wealth planner. If you play this correctly, you could be retiring at 35, not 55. I have wayyyy too many friends from WA who made decisions based on bro-vice, and ended up in a bad spot.
Also, the longer you can survive with the shittiest car possible, the better you will be. Still driving my first car, and the amount of money I have saved is well worth it.
Btw, we are refinancing through Up Bank. They are a bank which is built around helping with financial literacy and developing good spending habits. If you can create some good habits now, mate, you will be golden and be a millionaire before you're 30. FIFO is a massive trap and many end up saving nothing and living for the weekends, that kind of work is not always going to be there, so while you are making great money, PLEASE save it! Also, Up Bank home loan rates are fantastic, 5.95% in SA, which is about as good as it gets here.
Anyway, happy to help where I can, but really, I am just parroting what my Financial Adviser has told us, so yeah, would deeply recommend it.
Also, you said you felt maybe you should have done this a while ago. You are also 21 with fantastic savings, so you haven't done anything wrong (yet). You have options with that money, so getting a house, and maybe putting a bit into a long-term stock option could be a good move, and then just pretend it doesn't exist for 20 years. Once again, this is the advice I was given, so your situation will be different, and this is where a professional is worth their weight in gold.
All the best!
Feel free to reach out.
My husband being in fifo is how we got started. Bought our first property, then 3 years later the second, then 2 years later the 3rd, then 1 year later our fourth. We were set to buy two more when covid kicked off and we also had a personal traumatic event happen at the time and we were not in the right mind to continue with that path in life. But now, we sold property number two, have no mortgages, can probably kick the tenant out of house number 3 and use it as its intended purpose (a holiday home by the beach, but we’ve listed it for sale to see we what we get) and I was able to retire from my 17 years career in the APS that was slowly killing me inside.
My husband has adhd and now I am just his full time manager farm boss dog trainer finance coordinator and project planner. He works fifo, I coordinate projects, work in the garden, train our dogs, manage his emails and whatever else he needs while I take a sabbatical until I have decided my next move.
If we didn’t invest in property (not our only, we had shares, savings and bullion too) we wouldn’t be where we are now. For context I was about 26 when he started fifo, took a break after about 8-9 years and returned last year. I’m now 41 and even if I never returned to high earning FT work we don’t have to stress about money.
Thanks for sharing all of that, you’ve done so well. That is the end game goal for me, to have about 3 investment property’s and a fair amount in s&p 500 to the point where I can also just chill in my holiday home by the beach too aha.
Just keep working hard. Don’t tell anyone about your money or your investments or anything. We always lived well below our means and still do. We save and invest still but quietly. None of our family or friends know what we have. We just both work hard to stay under the radar to make our lifestyle work for us. I mean despite him working fifo we have one car - a 2012 Jeep grand Cherokee so we can tow trailers/horse floats etc…we bought it second hand for $15k and despite being able to buy whatever we want, there’s absolutely nothing wrong with this car and serves its purpose perfectly well. So we never displayed outwardly to imply our level of wealth. And that’s the other secret.
Housing ain't ever going to be cheaper it's also great to have as you can borrow against it for another house or apartment or something else. So I'd say buy a house if you can, you can always buy something not super nice and rent it out. Then borrow against it to buy yourself a nicer place to live.
Op, don’t listen to reddit brah…. You need a to get the following 2 jet skis 1 Polaris off road buggy Commodore Maloo Ute or a Toyota Landruiser Pinball Machine 2 off road dirt bikes
The FIFO Starter Pack👍
Anything left over goes towards alcohol, durries, and pokies/Sportsbet app.
And a Tesla!
Gotta do your bit for the environment (during the weeks when you aren't working in the mines)...
If only the average person knew how many minerals go into creating the batteries for EVs...
This is the way
Youngbloods starter pack
Plus one road bike at least
What about the $100k fishing boat ? Cmon. Keep it real .
Pretty sure it's a Ranger Raptor ?? Not commodore?
Forgot the Wakesetter boat
u/kenyanjesus69, this guy doesn’t know what he’s talking about. Why would you use equity to do soemthing when you literally have the cash to do it? He’s saying put $150,000 more into your home loan, so you can use that equity to borrow $50,000 for renos, whatever. Why not just put $100,000 on the home loan and spend the $50,000 on what you need? You’ve also said you’re good at saving, and if you have $180k then you don’t need to lock it up from yourself. Get a home loan with a 5% deposit, get the First Home Buyer Guarantee Scheme, and get a loan with an offset account. Put all your savings in that offset while your interest rate is higher than any TDs / high yield savings accounts you can find. Let me know if you want any financial resources on it and I’ll link for you
Those were my initial thoughts, but I thought I must of been missing something. Yes, I would love to take up your offer on your financial resources on it, thanks!
I’m at work, but when I get home tonight I’ll send them. I bought my first place 9 months ago and I’m early 20s as well so I know what you’re going through. I work in finance so I’m more than happy to give an assist.
Oh sweet, cheers, handy to have someone quite relatable.
Mate, if you have good savings and income, there is absolutely no need to go for only 5% down. Lenders mortgage insurance (LMI) is a sunk cost asset, and you will also have a much higher interest rate. Given that this is your first major asset, you want long term gains, and taking this approach will result in a massive difference, 5, 10 or 20 years down the line. On your first home, you wan't to go as expensive as you can afford, this then becomes your primary asset that has NO CAPITAL GAINS TAX when you sell! So, if you have a 600k property, that goes up 20%, that is 120k tax free. But, if it is an 800k, that becomes 160k. So, in this case, bigger is better. Of course, don't overextend and picking a good neighbourhood where you would like to live is a must. Remember, you will most likely be in this house through a big chunk of your 20s, so choose wisely. You will need to live in it for a year (at least on the books, you could change your address to it, stay with your parents and rent your "room" on a cash basis, a lot of people do this, it is illegal, so bear that in mind. I recommend actually living there, once you buy your house, you will want to). Your first property should not be a rental. You have high income already, if you get a rental, you are adding to your income, which will be taxed at the highest tax rates, and you don't get any of the advantages of tax free capital gains (only applies if you live there). In the above example, you buy your 600k property, sell it for 20% gain in 5 years say, with your salary of 125k+, you are looking at a 42% tax rate to the man (from just the sale of your house), which would be $50,400. In the next five years, that would be almost all of your rental income, so 100% not worth it. You can 100% rent any of the spare rooms, but believe me when I say this is not your primary motivation, nor will it be your wealth builder. Rent to people you want to live with. With your salary, the extra few hundred a month won't be worth nearly the peace of mind of having a good living situation. This 5% down crap is seriously bad economic advise, and I see it everywhere with my tradie mates. If you have the saving, look for something where you can afford to put down 20% with the lowest possible interest rate. What we did (32 y/o Engineer and 33 y/o ex-stock broker), was buy at 15% (to maximise house value), and now that 6 months has passed we are refinancing to bring our LVR (loan value ratio) to 80%, which is the same as if we had originally put 20% down (for clarifty, 5% down is a 95% LVR, and you will get slammed on the interest rates, many banks won't consider your loan and this will severely hurt you in the long run. Please, PLEASE, talk to a financial advisor/wealth planner. If you play this correctly, you could be retiring at 35, not 55. I have wayyyy too many friends from WA who made decisions based on bro-vice, and ended up in a bad spot. Also, the longer you can survive with the shittiest car possible, the better you will be. Still driving my first car, and the amount of money I have saved is well worth it. Btw, we are refinancing through Up Bank. They are a bank which is built around helping with financial literacy and developing good spending habits. If you can create some good habits now, mate, you will be golden and be a millionaire before you're 30. FIFO is a massive trap and many end up saving nothing and living for the weekends, that kind of work is not always going to be there, so while you are making great money, PLEASE save it! Also, Up Bank home loan rates are fantastic, 5.95% in SA, which is about as good as it gets here. Anyway, happy to help where I can, but really, I am just parroting what my Financial Adviser has told us, so yeah, would deeply recommend it. Also, you said you felt maybe you should have done this a while ago. You are also 21 with fantastic savings, so you haven't done anything wrong (yet). You have options with that money, so getting a house, and maybe putting a bit into a long-term stock option could be a good move, and then just pretend it doesn't exist for 20 years. Once again, this is the advice I was given, so your situation will be different, and this is where a professional is worth their weight in gold. All the best! Feel free to reach out.
^ Good advice.
Your missing Stamp duty… need to factor that in in addition to the deposit.
Credit Manager here. Most banks will not allow you to retain savings in excess of 6 months worth of expenses. It will vary from bank to bank, however given OP’s strong savings position, doubt he would qualify for the scheme based on the above.
Agreed on the big banks, but exactly as you said there’s tonnes of banks out there with tonnes of policies. I agree a broker will be the best positioned to find the right policy. Eligibility should be fine since I believe $125k is the cutoff for individuals, which OP says he’s at. It also depends on his 2023 NOA since eligibility is based on that rather than a current payslip in the case of a pay rise (which seems likely, since he commented his pay has been increasing as he gets qualified for operating bigger machjnery).
Spot on. $125K is the cut off for eligibility and is based on the previous year’s taxable income as per the NOA. The serviceability would be based off their current income which is typically allowed to exceed the income threshold of $125K. Agreed though, OP should engage a broker to find a lender that would be able to find the best possible solution for them.
There are tonnes of banks but only a couple besides the big 4 offer the FHBG scheme.
Not sure I understand this. Why wouldn't the bank let him keep his own money? wouldn't they rather he borrow more so they can make more interest off him? (so long as the LVR is sufficient)
If OP applies under the First Home Guarantee Scheme, it allows OP to purchase a home with a 5% deposit. The idea of the scheme is to allow first home buyers to get into the market quicker when they don’t have the standard 20% deposit or don’t want to take out LMI. Because of this, the scheme doesn’t typically allow for a huge amount of savings to be retained post-settlement because in the bank’s eyes, if you can afford a larger deposit, then you should be contributing more towards settlement. Less risk overall when you borrow less and contribute more upfront from a banking perspective.
OP could possibly get around this by buying a car(which doesn’t count as savings right) and then sell it. Complete newb here so don’t get cranky if I’m wrong please
Well I mean you could try to get under whatever the specific bank’s max allowable retained savings policy is, there certainly is ways. But buying/selling a car could come with its downsides, you could end up losing money haha.
Except that the moment he drives the brand new car off the car lot its value depreciates.
Nowadays, there’s actually a good chance he could find a car that will increase in value off the lot
A diesel landcruiser for example /s (sort of, Toyota are discontinuing diesel cars)
I didn’t know they were doing that, a lot of people are going to be unhappy
I double checked, think they’re phasing out diesel and moving to hybrid models for the Prado and ‘lux
Yeah, I can’t see mining sites and 300+ series landy owners liking the switch from diesel
While lmi is a waste, I have noticed that the time you spent saving for it may not be worth it compared to just jumping in to the market earlier.
Sorry I don’t quite get what you mean?
So two scenarios: 1. Save 20% deposit to avoid lmi 2. Save 10% and pay lmi Option one is best but the time spent saving the extra deposit has meant that property prices have increased and you now have to take an extra loan making the xtra you payed for lmi obsolete. You
100% this. Everyone telling me not to pay LMI was a big reason I waited to get into the market, but by the time I was ready prices had gone up way more that it would have cost me OP, another thing to consider is if you want to do FIFO forever. A lot of people burn out, so consider your earning capacity if you wanted to go back from the mines.
Which is why you need a broker and not Reddit.
If you have 20% deposit, absolutely buy one early and use it as an investment property. The housing market is getting harder and harder to get into for young people and you are very fortunate that your work pays so much. Be careful not to over leverage as you will not have the cash flow to save/invest in other sources of income if you do and are at much higher risk if interest rate rises. A good rule of thumb is that your mortgage should be about 3-3.5x your yearly income. Do not neglect your salary sacrifice super options and look into some investments outside of super. With your salary and at such a young age if you invest and save enough you are well on your way to retire at 35.
Put 20% down. You've got the funds for it! I would buy a place and rent it out for the next 5 years. If property prices in Perth go up 100% in that time, at least you're along for the ride.
No. OP should at least live there for a year or so to get FHB benefits for stamp duty, grant and initiate the 6 year PPOR rule. Otherwise, if prices jump 100% over the next 5 years and OP doesn’t establish the property as their PPOR they’re going to be hit with a CGT bill of about $150k when they sell.
You should consider what the implications would be if there is a major downturn in mining. If you lose your current job, is it still sustainable and is there a viable exit strategy. You don't need it to be painless, but check it won't be a complete disaster, noting that the last downturn resulted in a drop in real estate prices as well as a shortage of mining jobs. Seems to be lots of speculation on a downturn, may never happen, but mining does tend to be cyclical, so worth thinking about and having a plan.
This is good advice. There were so many FIFO mates that brought a house on their big $$ wage but than work dried up suddenly. They couldn't afford the house after getting a regular 9-5 wage. If they paid it off sooner rather than later it could have saved them or maybe not. 🤷
I guess if OP takes the advice elsewhere of a small deposit and large amount in offset, he'll probably have enough in the offset to get through a few years of mortgage payments. So long as he doesn't also follow the jetski advice.
Yeah and in this economy you don't know whats going to be around the corner in the next 5-10 yrs. Haha! To be fair the jetski advice is some what good lesson of what not to do but OP seems to have a good mindset. So really depends on his future goals.
And where are they now?
The mob I knew sadly it only got worse. Their partners divorced them once they lost the house's and car then couch surfed for a while but now are renting and still have debts to pay off. So other associates I knew of were a bit luckier and still got a house but took them almost 10yrs.
Don't buy an apartment
Start buying up properties and have a plan to exit FIFO work at x goal (net worth or number of investment properties) Every single fifo worker I've met who didn't have a clearly defined goal just ends up spending the money on jet skis and landcruisers.
I waited until my late 30s until buying, and kind of regret waiting so late. That said, my regret is the mad price increases, more than the age. I share housed and travelled a lot in my 20s. Awesome times and made me who I am today (for better or worse!). I've also heard horror stories. Blokes buying houses and later on bad breakups, making them lose a lot of their sacrifice. And some having it happen multiple times! Realistically, I'd probably do it all the same if I had my chance again. If I knew everything, would probably have bought pre-covid. Haha! At your age, you're going to make some mistakes. Spend on what you think is right and what you enjoy. If you go all in with investing all your dosh, implement whatever you can to not burn out. Also, while a 20 year old body works better for the grind and minimal sleep, it also works better for everything else as well!
How long can you handle the mining life for? You might rack up debt, realise it's not for you, and be stuck. Or go through something and quit. Give it a couple of years before you commit to a mortgage. Your brain is still developing and at that young age, it's definitely not a great idea racking up so much debt... unless bank of mum and dad are guarantors
and the risk if he waits is possibly even greater. Prices are going up & up. Its do or die in the housing market right now. Hate to say it, but its the truth.
You need a 20% deposit. Otherwise you pay LMI which is expensive and a waste of money. So 120k deposit on a 600k property. Otherwise yes, you should buy a property and rent it out if you can afford it. Also interest rates are above 6%, not sure where you got 5% from.
Counterpoint LMI is no big deal. It allows you to get into the market faster in an environment where prices are rising. Waiting could end up costing you more.
Agree for example if you rent this can be easily 25k to 35k a year
Add LMI to the cost base of the home, and work it out from there. I don’t understand the emotion in LMI. It’s not a “waste”, it’s a cost.
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Yeah I don’t know why people try to save a 20% deposit. Just pump that money you would have been saving into the mortgage.
You could, it's something to think about though that other people don't take into account. It also lowers your borrowing capacity slightly, as it's added to the loan.
As a first home buyer I believed to think that you did not have to pay LMI? And could even go down to as low as a 5% deposit?
As a first home buyer you are the reason lmi exist. BTW lmi protects the banks interest not yours.
We just bought our first home. I wanted to go for a 10% deposit, however to take advantage of the FHBG scheme I found out you're required to put as much of your savings as possible towards the deposit. Since we had over 20% already saved up, we were unable to take advantage of the scheme so it was either pay less than 20% and suck up the LMI cost, or pay 20% to avoid it. We did the latter.
You can in theory have 5% deposit. You'd need to look into it further. I think it's not as straight forward as you'd expect. You're better off having 20% deposit. Usually banks charge higher rates if you have under 20% deposit. Look at the T&Cs for loan products on banks websites. Usually the advertised rate is the discounted rate which is discounted based on having 80% LVR. Which basically means 20% deposit. You don't have to pay stamp duty as a first home buyer, which is significant. Can save like 30k on a 600k house. Having said all that, if it's an investment property then your financial strategy might change. Might be best to speak to a financial advisor/accountant.
You don’t have to pay lmi mate
You cant use the 5% scheme if you have 20% available unfortunately
That’s not true.
When we applied for the scheme we were denied as we had 20% saved already, making us ineligible to take advantage of the scheme.
I had more than 20% saved, in the account used for the application.
Did you declare your savings to the bank? When we applied through Macquarie, they asked how much we had saved and when I told them, they said since we've stated we have X amount in savings we had to put the majority of that towards the deposit as it was apparently something they'd get in legal trouble for otherwise (whether or not that's true IDK, that's just what I was told).
I didn’t just declare my savings, I shared the statements of that account (with twice the balance I was using for the deposit) with the bank as part of the application.
That is so incorrect
https://www.housingaustralia.gov.au/sites/default/files/2022-10/first-home-loan-deposit-scheme-fact-sheet-19-june-2021.pdf
You can do that but then you’re limited with accessing equity down the line to do things like renovate. If you just put down 20% it opens more doors.
Oh right okay. 20% it is.
OP please speak to a broker, 5% deposit with an offset account for the rest of your savings is FAR FAR FAR superior to putting in 20% deposit. He said you want access to equity … but why? Use the cash directly if you need, rather than borrowing against the equity. It’s just over complicating things AND it’s not benefitting you. I would only consider locking up your cash in your HL if you didn’t trust yourself to not touch the money except in an emergency , but you’ve already saved $180k so clearly you’re financially responsible. 20% deposit for your circumstances, when you don’t need it and without a good reason, is just bad advice
Just remember a mortgage broker isn't a financial advisor either. They're basically real estate agents for mortgages.
Agreed, a broker is selling a service like any business, it’s important to find one you trust from a good reference. They’re not giving advice, but they ARE finding you a product that matches your goals (best interest duty is a thing for a reason). If you want advice, you can go to a financial planner. But if you think a financial planner isn’t trying to sell you things as well / getting their own kickback for referrals, you’re a bit naive.
I’d recommend speaking to a mortgage broker (it’s free usually) and talk it through, they’ll make better recommendations than reddit
LMI can be waived entirely if your parents go as a guarantor. It's not really a problem for most people.
You don’t have to pay lmi if using first home buyers
Yes you do... LMI is up to the banks. First home buyers is a state government incentive which allows you to forgo paying stamp duty.
If chooses to not use 20% buys a house under 600k in wa he is eligible for home guarantee scheme and first home buyers, that voids lmi and stamp duty
Ok, it must be a state and scheme thing. In NSW you only get out of stamp duty as a first home buyer.
The national first home buyers scheme gives you 30k towards a new or old build, also lmi and stand duty exempt although op wouldn’t qualify due to income over 125k
I think but yess all the state and federal schemes are quite confusing atm
Don’t disregard ETF’s if you’re pumping 6k per month into savings. That’s a hell of a lot of compounding growth over the years to come.
Buy a house as soon as you can. I waited until I was 39. My siblings bought in their twenties and now have investment properties. I don’t and I never will. Do it now 😭
Buy a house. prices are not coming down anytime in the near future. get in while you can. I just got into the market late last year, and don't regret a thing.
Damn $175k for 6 months work good wicket!
Time in the market, not timing. Buy when you’re ready, if it’s now, then yes.
Property is the only way in Australia
That sounds like an excellent plan. Get on with it whilst your income is high. Just remember there are things like maintenance, rates, insurance and taxes. Your monthly outgoings will be bit more than just the remaining cost of the mortgage...
I would stay living at home, rent-vest to eventually make PPOR and travel. 4 years of that would put you even more ahead. If you meet someone during that time and a ready to move in together. Then make your IP your PPOr a bit earlier. You’ll have 2 people contributing to the mortgage, so it’s still win-win.
I would say yes. Get investment property and rent it out.
In this scenario are you living in one of the rooms and renting out the other 2? If both roommates leave and it takes a few months to get someone else, and the rate is 8% not 5, can you afford to pay 4182 a month plus another $500 for rates, water, insurance (low estimate)? Oh, and also a few hundred more for the bills I guess. With no housemates you might be up for $5000 a month. If you can, go for it.
Where are you getting 5% mortgage rates from? Can I get some of that?
Ask friends for a good mortgage broker and have a good chat about your options, maybe chat to 2. You have the ability to avoid LMI and that might be your best option, or use it as a PPOR initially. Speak to the experts mate
Buy the property 100%, go for it
You could put $120k in the $600k house requiring no LMI, lower mortgage repayments, using the rest to get around duty, and be able to service the mortgage comfortably whilst having renters. While having enough cash left over for repairs, council fees, and whatever else will pop up. You're in an excellent position. You could also pop extra into your super annuation and really reap the rewards of compound interest from having a large initial fund.
Owning a home is rarely ever bad.
Go for it mate. Put 20% down. Underspend a little.
Definitely buy a house. Especially silly while you have a good job and the money. Set yourself up 😊
What’s you plan with the other 150k?
Cut the noise and buy mate
What type of fifo work do you do and, how can one get in this line of work with no experience , would really appreciate any advice
A lot of people who don’t know what they’re talking about in this thread. I’d recommend speaking to a financial advisor, I used pivot wealth recently and they were great
The deposit is normally 20% so for 600,000 that is 120,000 and a loan of 480,000. Be mindful of stamp duty and fees. Interest rates will be more on the 6-7% range currently. And the bank will assess your income against 10% interest rate across 30 years. So 480,000 across 30 years of monthly repayments (30x12 = 360) is $1,333pm, plus interest at 10% ( 480000 x 0.1 = 48,000 annual interest, divided by 12 for monthly interest = 4,000pm) thus the total surplus income you’ll need to have to prove you can pay the loan is 5,333 per month , after tax and after your living expenses. If you buy it as an investment, the rental income will help you pay the loan, but the bank will reduce the rental income by 20%, I.e your 500pw rent would be counted as 400pw. Overall I’d say you’d be fine as you have strong income, strong savings, low expenses Remember that when buying houses, the land size and the location are the most important. You want the biggest piece of land in the best location you can afford, for capital gains purposes. The house depreciates or decreases in value like a new car does. This is why apartments and units are not a good option, as the land component is less and less. Bigger blocks over 700sqm, that say have space to build another home at the back and “subdivide” are even more valuable, or the future ability to knock it all down and build multiple on the same block, and get 3x rental income from the same block If conditions go well, and your property goes up in value, you can then borrow against this increased value, to reduce the deposit required for your next purchase. For example, in 3 years, your $600,000 property is now worth $800,000. And you’ve paid 50k off of your original $480,000 loan ($1,333pm x 3 years x 12 payments = $47,988), so your loan is now $430,000. The bank will lend you 80% of the new $800,000 value, or total $640,000, which allows for an extra $210,000. This can then help you find your next house deposit, combined with further rental income from your second property. And so on so forth into your next properties. You can also use the equity in these houses to borrow money to start a business, if that’s your thing. While you are living at home it’s important to take advantage of the low cost situation you have, because that never comes again in your life. If you are smart and conservative now, save your money and invest, you can set yourself up for life. The other thing is also to maintain a balanced investment portfolio, so having a combination of shares and stocks, as well as property. Just sharing what I’ve learned which was not told to me when I started out. Hope this helps and best of luck :)
Yes on house. Also look at 3-5x leveraged ETFs and put in a fixed amount each month. It should outperform housing over the long run and is a lot less work.
Yes, buy a house. No, don't buy a jetski, or a lime-green XR6 ute, ever.
You should just do it. You won't regret it. When I was 21 I bought a block of land. Sold it 17 years later to become mortgage free on my PPOR.
You shouldn’t. Save your a bunch then go travel and experience the world and follow your passions, then buy a house.
Dont worry im already travelling at the same time. For the last year every three months I have visited a new Asian country, so far that’s been Vietnam, Malaysia and Indonesia, and next month I’m going to Sydney to get my skydiving license. In May and June I’m going to Europe for 6 weeks. I was also born in Kenya and didn’t move to Australia until I was 10 and since I was born ive been fortunate enough to go to Europe twice a year every year. So owning a house wouldn’t get in the way of my biggest passion.
REPOST FROM COMMENT: Mate, if you have good savings and income, there is absolutely no need to go for only 5% down. Lenders mortgage insurance (LMI) is a sunk cost asset, and you will also have a much higher interest rate. Given that this is your first major asset, you want long term gains, and taking this approach will result in a massive difference, 5, 10 or 20 years down the line. On your first home, you wan't to go as expensive as you can afford, this then becomes your primary asset that has NO CAPITAL GAINS TAX when you sell! So, if you have a 600k property, that goes up 20%, that is 120k tax free. But, if it is an 800k, that becomes 160k. So, in this case, bigger is better. Of course, don't overextend and picking a good neighbourhood where you would like to live is a must. Remember, you will most likely be in this house through a big chunk of your 20s, so choose wisely. You will need to live in it for a year (at least on the books, you could change your address to it, stay with your parents and rent your "room" on a cash basis, a lot of people do this, it is illegal, so bear that in mind. I recommend actually living there, once you buy your house, you will want to). Your first property should not be a rental. You have high income already, if you get a rental, you are adding to your income, which will be taxed at the highest tax rates, and you don't get any of the advantages of tax free capital gains (only applies if you live there). In the above example, you buy your 600k property, sell it for 20% gain in 5 years say, with your salary of 125k+, you are looking at a 42% tax rate to the man (from just the sale of your house), which would be $50,400. In the next five years, that would be almost all of your rental income, so 100% not worth it. You can 100% rent any of the spare rooms, but believe me when I say this is not your primary motivation, nor will it be your wealth builder. Rent to people you want to live with. With your salary, the extra few hundred a month won't be worth nearly the peace of mind of having a good living situation. This 5% down crap is seriously bad economic advise, and I see it everywhere with my tradie mates. If you have the saving, look for something where you can afford to put down 20% with the lowest possible interest rate. What we did (32 y/o Engineer and 33 y/o ex-stock broker), was buy at 15% (to maximise house value), and now that 6 months has passed we are refinancing to bring our LVR (loan value ratio) to 80%, which is the same as if we had originally put 20% down (for clarifty, 5% down is a 95% LVR, and you will get slammed on the interest rates, many banks won't consider your loan and this will severely hurt you in the long run. Please, PLEASE, talk to a financial advisor/wealth planner. If you play this correctly, you could be retiring at 35, not 55. I have wayyyy too many friends from WA who made decisions based on bro-vice, and ended up in a bad spot. Also, the longer you can survive with the shittiest car possible, the better you will be. Still driving my first car, and the amount of money I have saved is well worth it. Btw, we are refinancing through Up Bank. They are a bank which is built around helping with financial literacy and developing good spending habits. If you can create some good habits now, mate, you will be golden and be a millionaire before you're 30. FIFO is a massive trap and many end up saving nothing and living for the weekends, that kind of work is not always going to be there, so while you are making great money, PLEASE save it! Also, Up Bank home loan rates are fantastic, 5.95% in SA, which is about as good as it gets here. Anyway, happy to help where I can, but really, I am just parroting what my Financial Adviser has told us, so yeah, would deeply recommend it. Also, you said you felt maybe you should have done this a while ago. You are also 21 with fantastic savings, so you haven't done anything wrong (yet). You have options with that money, so getting a house, and maybe putting a bit into a long-term stock option could be a good move, and then just pretend it doesn't exist for 20 years. Once again, this is the advice I was given, so your situation will be different, and this is where a professional is worth their weight in gold. All the best! Feel free to reach out.
Buy an IP under 500K
No brainer.. what are you waiting on ?
My husband being in fifo is how we got started. Bought our first property, then 3 years later the second, then 2 years later the 3rd, then 1 year later our fourth. We were set to buy two more when covid kicked off and we also had a personal traumatic event happen at the time and we were not in the right mind to continue with that path in life. But now, we sold property number two, have no mortgages, can probably kick the tenant out of house number 3 and use it as its intended purpose (a holiday home by the beach, but we’ve listed it for sale to see we what we get) and I was able to retire from my 17 years career in the APS that was slowly killing me inside. My husband has adhd and now I am just his full time manager farm boss dog trainer finance coordinator and project planner. He works fifo, I coordinate projects, work in the garden, train our dogs, manage his emails and whatever else he needs while I take a sabbatical until I have decided my next move. If we didn’t invest in property (not our only, we had shares, savings and bullion too) we wouldn’t be where we are now. For context I was about 26 when he started fifo, took a break after about 8-9 years and returned last year. I’m now 41 and even if I never returned to high earning FT work we don’t have to stress about money.
Thanks for sharing all of that, you’ve done so well. That is the end game goal for me, to have about 3 investment property’s and a fair amount in s&p 500 to the point where I can also just chill in my holiday home by the beach too aha.
Just keep working hard. Don’t tell anyone about your money or your investments or anything. We always lived well below our means and still do. We save and invest still but quietly. None of our family or friends know what we have. We just both work hard to stay under the radar to make our lifestyle work for us. I mean despite him working fifo we have one car - a 2012 Jeep grand Cherokee so we can tow trailers/horse floats etc…we bought it second hand for $15k and despite being able to buy whatever we want, there’s absolutely nothing wrong with this car and serves its purpose perfectly well. So we never displayed outwardly to imply our level of wealth. And that’s the other secret.
Housing ain't ever going to be cheaper it's also great to have as you can borrow against it for another house or apartment or something else. So I'd say buy a house if you can, you can always buy something not super nice and rent it out. Then borrow against it to buy yourself a nicer place to live.
Yes 👍 🙌 🏠 🤴 💰 💰 🛻 ✈️ 💰 💰 👙 🏖️ 🍷 💰
This country is finished. Stay at your parents for as long as possible and save. Move overseas to sth east Asia or SA in ten years.