mortgagefirst home buyer 3 Mar 2008 11:00 PM
The experiences of a First Home Buyer in Australia Part 1 by Zuzana Buttel
Six months ago my husband and I (sounds very royal!) decided we had sufficient funds saved to buy our first home in Sydney, Australia. We had a combined income of around $130,000 and had no immediate plans to start a family. We were unsure of how much we could borrow so we searched the internet and found some very good mortgage calculators that allowed us to input our income and expenses to work out a loan amount that we could service comfortably.

The “How much can I borrow Loan Calculator” determined that on our income we could borrow $720,000. This was on the basis of a 30 year loan term and an interest rate of 8.75% p.a. variable and
1. no dependent children
2. no other debt
3. 2 credit cards with combined limit of $5000.

We had been thinking of buying a car so we added a $1000 per month expense for a car lease and this reduced our borrowing capacity for our first home to $563,000. We had a deposit saved of $100,000. We checked out the costs on a first home buyer purchase. For most property purchases the costs of buying and borrowing represent about 5% of the purchase price. First home buyers are much better off because of the government First Home Owner Grant which is now $7000 in most states. There are also stamp duty concessions for first home buyers on their mortgages.

My parents had advised that they could lend us $20,000 but rather than put this into the actual first home buyer purchase they suggested that we include an offset account in our loan structure. We were surprised to find that there are some lenders who will provide a 100% offset account and this can be offered on a fixed rate loan (we wanted a fixed rate for at least 5 years because we were worried interest rates might increase).The 100% offset account of $20,000 meant that although we planned to borrow $500,000 @ 8.49% fixed for 5 years we were only going to be paying interest on $480,000. The interest saving over the loan term of 30 years was $186,603!!

When we added a further $1000 per month as an extra monthly instalment (instead of buying the car) the interest saved was over $500,000!! This basically reduced the loan term form 30 years to only 15.

If you can stretch yourself a bit when you don’t have children or other debt and pay as much as possible off your first home buyer home loan it really makes a huge difference. I know that it is likely that at some stage children will come along but in the meantime we are really trying to pay at least $500 extra per month to the home loan. Public transport can be a hassle but when you think of how much you can save on your first home buyer loan it makes a lot of sense to catch the bus or train for as long as you can! And think of the saving in petrol costs!


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TODAY: Thursday, 20th November, 2008
WEALTH MAXIMISER - INVESTOR ASSIST UPDATE - JUNE 2008
The ATO has recently published an edited version of a Private Ruling on its website: http://www.ato.gov.au/rba/content.asp?doc=/rba/content/81797.htm A taxpayer and client of Austral Mortgage, applied for the private ruling to seek confirmation from the ATO that if there was a shortfall between his investment income and his investment outgoings then that shortfall could be capitalised under the home and investment loan & line of credit structure noted in his application.  

WEALTH MAXIMISER UPDATE - MAY 2008
Ever since the High Court decision in Hart's case, taxpayers have been seeking clarity from the ATO on the deductibility of capitalised interest in certain loan structures. On 16th April 2008 a favourable Private Ruling issued to an Austral client that provides insight into the ATO's current thinking on the subject.  

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WEALTH MAXIMISER UPDATE - FEBRUARY 2008
Wealth Maximiser Update 12th February 2008 - We have advice from the ATO that it is well advanced on a binding Tax Determination regarding the deductibility of capitalised interest on a line of credit facility. Borrowers with both a home loan and an investment loan should consider including a capitalising line of credit within their loan structure or at least ascertaining from their lender that they could access such a facility by way of a simple variation of their existing mortgage.

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Did you know that Austral has a wholly owned subsidiary, Gem Home Loans Limited, in Auckland NZ - we are able to assist with organising mortgage finance for you should you be considering buying property in NZ.

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Mortgage Calculator
A number of excellent resource tools are now available on the internet for people in Australia seeking a loan to finance the purchase of a property or refinance an existing mortgage. One of the most useful and user friendly tools is a mortgage calculator. Before going too far in the purchase and /or borrowing process it is a worthwhile exercise to quickly gauge your borrowing capacity and also determine how your new mortgage repayments will impact on your personal cash flow. Mortgage calculator...

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