# Not sure what to expect!



## Nelly87 (Jul 3, 2011)

My Australian partner and I eventually (as soon as possible, pretty much, even if that isn't very soon) want to buy a house together. He and most of his family live in Melton now (Victoria) and I really like it there. I've heard of people they know renting 3-bedroom houses for less than $600 a month, and people who have a house of that size who pay $300 a month on mortgage. I believe them, obviously, but I'm starting to think they were just really lucky - were they?

Wherever I search online for houses in the areas around Melbourne, it's all more expensive than that. Be it rent of $300 a _week_ or killer mortgages that require payments of over $1000 a week for a house that size. I'm confused.

I happen to work in the mortgage sector here in The Netherlands and though generally our properties are much more expensive when you either rent (I'm renting a tiny room for $500) or buy (less space here so space is worth a lot more money), the killer interest rates I see on australian mortgages online scare me. I see interests of 5.99% fixed for 5 years - when here, people switch banks if the percentage gets that high and we have mortgages of in the 4%+.

Is it just that online, properties are generally more expensive? Can it get cheaper than what you find online if you know the right people? How does the real estate/mortgage market in australia really work? How common are fixed interest rates and what is their average height?

It's odd because just the other day I was watching a documentary on a Dutch girl moving to the Gold Coast to live with her Australian boyfriend and even _they_ were gloating about how affordable housing is. I'm starting to seriously doubt myself.


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## chifin (Sep 30, 2011)

Nelly87. Hi, I'm in Perth, but have a few responses on your questions... _[the following is without consultation and should be taken as generic comments and not specific advice. Some figures have been approximated and estimates used to show concepts and not actual outcomes]_

With regard to property in Australia, it is fairly well regulated in each State so what you see online (eg. realestate(dot)com(dot)au is a good web site) should reflect what is going on in that suburb you're interested in. On any purchase/sale you can negotiate a price down if you feel it is over-priced and the seller will either comply or not.

In Melton it seems to be a diverse property range (in prices)... but, a $400,000 house would seem possible and meet your 3 x 2 size requirements (not sure of the areas but there seems to be supply). So, an 80% loan (if you have savings) of $320,000 at a interest rate of say 6.5% fixed for 3 years (to provide stablity) would see you paying a mortgage of $400 per week (give or take a little). Although, the interest rates are considerably higher than in your current location, if you think that it is not so much the Interest that gets people, but their initial investment in the house. For example, same price $320,000 at 8.5% interest is $525 per week, so yes, the Interest can hurt, but not the same as buying a house for $600,000 at 6.5% (fixed for 3 years) which is $750 per week.

So, what I'm saying is you may need to start modest in a 3 (bedroom) x 2 (bathroom) and see if you can renovate the house or improve it in some way for the future. If you focus on finding a suitable low cost house, the interest rate shouldn't affect you too greatly. Just my opinion. In Australia, breaking a fixed-loan-period (eg. within 3 years on a 3 year fixed loan), you will be (generally) up for considerable penalty fees for breaking the contract. So, if you're planning on moving after a short establishment period, you need to work out your timing on the type of loan.

In respect to "affordable housing" in Australia, it is hit-and-miss. For example, in Melton as you will have seen, there are houses as low as $250,000 (in next suburb Kurunjang) with 4 bedrooms, 1 bathroom. Sure it looks a bit simple, but for $250,000 at 6.5% for 3 years, your weekly mortgage repayment is only $315 per week (at 100% of the purchase amount).

So, often "affordable housing" in Australia comes down to selecting a simple house that isn't too extravagant. It will be affordable if you -
1) Get lucky and find a bargain that someone has renovated, but perhaps lived there a long time, so don't feel the need (or have the knowledge) to boost the price right up?
2) Find a simple "ugly-duckling" on the street, that no-one wants, and you can do the improvements yourself or with help over time.
3) Start in the mid-range pricing, so you don't live in this lovely country working every minute of the day, trying to pay off the mortgage to the bank.

If you must go up to the higher range (for your personal preferences/requirements, etc), then again, if you can afford to do some renovating work, you might find a bargain even within the upper price range, and therefore add your own efforts into the house (and build it's wealth for later).
The property market in Australia is certainly going to be flat (or volitile) over the next 5+ years as the world economies thrash about. There isn't the same "buy... sell... make money... buy... sell... make money" formula that people were exploiting only 5 years ago.

I would focus on your partners support network (eg. family and work position) to start off with a modest house such as this one - Go to RealEstate(.)com(.)au and enter house number 107714436 (I have no relation, benefit or outcome of showing you this property, just an example).

The house is probably a bit out-dated and needs some little bits of work, but WOW! what a price to get you started? And again, if you or family have some savings of $55,000 then the purchase price of $250,000 + 5% (estimated fees) = $262,500... which at 80% of that (which is a base %figure for Australia to avoid Mortgage Insurance... but as always there are many variations and options around this)... would be a loan amount of $210,000 + your savings of $55,000 = $265,000 which should cover the purchase. The $210,000 loan might be a fixed rate as low as 6.4% for 3 years or a standard variable rate of 6.9%.... either way you would plan on 2% higher than current average of say 6.5%, so aim for 8.5% as a minimum - which is $345 per week. So, if you think you could handle $345 per week as you should consider the loan after the fixed period as well (but the actual for the 3 years would be only $265 per week), there is a house waiting for you in Australia.

If you take the above further -
A $500,000 house, with 5% in fees (estimate), making a total amount required of $525,000.... at 80% of this being $420,000 as you would have savings of $105,000... then your weekly repayment over a 3 year fixed term of 6.5% is $525 (per week).

My company in Perth - "Chilli Finance" (yes, unusual name, excellent service!) can assist you as we are Finance Brokers in Perth, Western Australia (ACL#390012). We have clients all around Australia, as we can assist over the phone and email, and do not need to be in the same State as you are trying to move to.

As you are in the "mortgage" industry in Netherlands, it will be easy to further assist you in this process. It is a matter of learning how the Australian Banks operate in regards to mortgages, lending, etc.

Good luck.

Mark Scholmann
Chilli Finance
08 9381 8121


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