Buying house - 10% or 20% home loan deposit?

[MalinViktoria]

DH and I have been wanting to buy a house for a while now, and we were planning to finally take the step early next year. However, we ended up spending most of our saving on the wedding last year (due to a lot of unexpected things popping up). Our situation now is that we're renting a house, I'm working two part-time jobs and DH one full-time, and we're very slowly building up our savings again.

I know at first glance looking at the title of this thread, everyone would say "definitely 20%", because I realise that the more you pay as a deposit, the easier it will be to pay back your loan. But I'm wondering if due to our circumstances, we might be better off with a 10% deposit loan sooner rather than a 20% deposit loan later (much much later).

The reason is this. We're both living in a different country from our families, so we have no option to stay with family and pay cheap rent while saving up for a deposit. So we could wait another 3-4 years until we have 20% of the loan we want, but meanwhile we'll be paying rent, which is dead money, and house prices will be going up. So I'm wondering if we'd be better off getting a house in about 6 months if we can save up the 10% by then, and yes, we'll be paying our mortgage off over a longer time, but at least it'll be ours - our investment in our own property, - rather than dead money to some landlord to live in a house in which we can't even hang our wedding photos on the wall because we're not allowed to put as much as bluetac on the walls.

I probably sound desperate, but I honestly really want to buy a house, and own something that is ours, and that we can decorate and make a "home". Once our lease is up in February, the landlord wants to demolish the house, so that means we'll have to look for a new rental, and that will be our 4th time of moving in 6 years. I'm sick of it.

10% of the price range we're looking at is $30,000; 20% is $60,000. We only have 10,000 saved up, and needless to say, saving up another $50,000 is going to take a really long time. That's a lot of rent money that could be going towards our own home.

Anyway, I'm just looking for opinions and personal experiences if anyone has any! Thanks.

[sidonie]

Maybe look at buying a place and taking in a boarder for a couple years to get you a bit ahead? It means sharing costs of utilties will be cheaper and you have some extra money to pop onto the mortgage. If you decide to have kids at any point, then i'm guessing that probably won't work for you but if thats not an immediate thing, the boarder option is a winner!

[MalinViktoria]

Maybe look at buying a place and taking in a boarder for a couple years to get you a bit ahead? It means sharing costs of utilties will be cheaper and you have some extra money to pop onto the mortgage. If you decide to have kids at any point, then i'm guessing that probably won't work for you but if thats not an immediate thing, the boarder option is a winner!

That's a good idea, definitely not planning kids for the immediate future. The good thing about the house we're renting now is that there is a completely cut off downstairs bedroom, bathroom and living room, so we only really see the our housemates in the kitchen. If we could somehow find a place like that, it would be perfect, but I'm also not opposed to sharing the whole house for a couple of years.

[Balls]

I would talk to a bank, they'll give you the best advice.

Honestly, if I could buy a house now, no matter what my deposit, I would because DH and I will probably be pushed out of the market altogether soon. Prices are only going to increase and if you look at it that way, you'll need a bigger deposit in a few years anyways to cover the 10% so it may not be worth your while to save for a few more years. I'd be more inclined to buy now while prices are half decent and chuck as much onto the mortgage as possible with your repayments.

ETA I'm not saying your 20% would turn back into the 10% but it's something to think about Good luck whatever you decide!! Can I just say that most of my in laws are in real estate and all are saying that now is a fantastic time to buy.

[MalinViktoria]

I would talk to a bank, they'll give you the best advice.

I actually talked to Westpac a few months ago, but I only asked about the 10% option because as far as I knew, that's what we were aiming for. It's only lately that DH has said he wants to save up for 20%, which is why I'm asking for other opinions. Anyway, they gave me a "proposal" for a $30k house, 10% deposit and approx 7% interest rate, and minimum repayment would be $500 p/w, which we can do, and it would be paid off within 25-30 years I think. There is the mortgage insurance you have to pay when you do any less than 20%, but as far as I know, that's just a one off payment of around $5,000, which we can account for when we save up. There is also the $7,000 first home loan grant that will help - I was hoping the $10,000 extra home loan boost would continue until next year too, but no, we're not so lucky. *lol*

Honestly, if I could buy a house now, no matter what my deposit, I would because DH and I will probably be pushed out of the market altogether soon.

Can I ask what you mean by this? It's already quite difficult for us to get a loan because I'm self-employed, plus neither of us are Australian citizens, so if there are more restrictions coming, I'd love to know about it.

[Balls]

Haha we miss out on all the government bonuses as well, it's no fun. Well I would do the math for a 20% deposit but then have a look around on the net to see how much prices are expected to go up (it'll only be a guesstimate but it's better than nothing) and see where you're at then.

It might only work out to be a 15% deposit by the time the house prices have raised and then you should account for the money you've paid in rent that could have gone into repayments. Paying 350 dollars rent a week for another three years means you've put 54600 into rent that could have gone into paying your house off on top of the 10% deposit.

If you start paying your 500 a week repayments now, in three years you've paid 78000 off your loan. Is the cost of saving another 10% deposit going to be worth more than that when you take into account the money you've been paying in rent?

I'm not trying to sway you one way or another, I'm just typing out what I would be considering if I were lucky enough to be in your shoes! I would only wait if you could save a considerable amount more than you would have spent on your repayments in the time it took to save it IYKWIM.

[Balls]

Honestly, if I could buy a house now, no matter what my deposit, I would because DH and I will probably be pushed out of the market altogether soon.

Can I ask what you mean by this? It's already quite difficult for us to get a loan because I'm self-employed, plus neither of us are Australian citizens, so if there are more restrictions coming, I'd love to know about it.

Well unless what we earn goes up with the prices of housing which I doubt, we won't be able to afford a decent house in the next few years. That's just us personally though. It just means that the house prices will go up, but our wages will stay the same and we wouldn't be able to afford to buy one at all until our income increases.

But if we had a deposit now, and were pre approved for a loan, there are houses out there atm that we could afford.

ETA I'm just talking house prices here, I couldn't help you with requirements for loans and stuff, I really don't know much about that!

[MalinViktoria]

Honestly, if I could buy a house now, no matter what my deposit, I would because DH and I will probably be pushed out of the market altogether soon.

Can I ask what you mean by this? It's already quite difficult for us to get a loan because I'm self-employed, plus neither of us are Australian citizens, so if there are more restrictions coming, I'd love to know about it.

Well unless what we earn goes up with the prices of housing which I doubt, we won't be able to afford a decent house in the next few years. That's just us personally though. It just means that the house prices will go up, but our wages will stay the same and we wouldn't be able to afford to buy one at all until our income increases.

But if we had a deposit now, and were pre approved for a loan, there are houses out there atm that we could afford.

ETA I'm just talking house prices here, I couldn't help you with requirements for loans and stuff, I really don't know much about that!

Ah yeah, I see. Well, I'm worried about this too, because at the moment, what we earn is pretty much just enough, so unless DH gets a decent raise when the house prices increase, we won't be able to afford to buy then.

[Balls]

It's so tricky, isn't it?

I don't know if what I said before makes sense so I'm going to type out the situation my MIL is in at the moment.

Right now she has been pre approved for a loan about 300k. With her deposit which is pretty huge from the sale of her last house, her repayments would be about 310 a week. That means in 3 years from now she would have paid back 48360 on her loan.

Right now she's paying 210 a week in rent and could really only afford to save an extra 80 dollars a week for a bigger deposit on her wages.

That would mean she would have saved an extra 12480 over three years for her deposit on top of what she has. So for her, because she would have paid back about three times as much on her repayments, it's better for her to buy now than to save because the repayments wouldn't really be that much smaller with that amount of money.

Also, if house prices do go up like they're expected to, then she would pretty much be in the financial situation she is in now and could probably only get the same kind of house for her money despite her extra savings.

Does that make sense? I feel like I'm rambling haha.

[Tracylacy]

I say do it on 10% if you can afford the repayments. And if you are really committed to paying it off as quickly as you can, put every spare cent into the loan, it is really surprising how quickly that the time left on the loan goes down when you make extra repayments.

As far as I'm concerned - any money that you are paying in rent is money that could be paying off your house. There is also the issue that a pp said about house prices going up over time, so if you are constantly aiming for a 20% deposit, your goal will have to constantly go up.

And as another person said, if you are open to a boarder, you could pay that money into the loan to bring it down even quicker.

Buying a house was the best financial decision I have ever made and I wish I had done it sooner - so my vote is obviously to do it as soon as you can.