I'd say save as much as you can. If you can save the 20% deposit, you dont pay mortgage insurance. You're also seen as a better risk for the banks than the 95% loans. So many people who've taken out those kind of loans get into repayment trouble.
Have a look at things like the barefoot investor, money magazine etc. I can recommend a financial advisor if you'd like to talk to one.
Assuming prices will go up or down is speculating/ gambling. I'd look at finding investment property that will produce a positive income. If you're not going to live in it, I'd look at rental returns in rural centres and compare to Melbourne. I'm pretty sure you can get a better return outside of Melb.
JM - you do have to live in the property for a period if you get First HOme owners grant - it isnt the first 6 months but it is something like 6 months of the first year or something like that... so you wont get that... if you have over 20% deposit you wont have to do mortg insurance...
The theory of having as big a deposit is a good one. However for us, it was just a theory. With our first house, we borrowed everything but the kitchen sink to make it work. It was the only way we could break into the housing market as owners.
However for our second mortgage it was much easier. We were able to use the first property as security to borrow much, much less for the second place.
Now that we are about to get our third mortgage, we have a heap of cash in the bank (we sold both properties) which will be our large deposit.
Given your situation, I'd be looking at towns along the Bendigo v-line train route. Woodend, Castlemaine etc have heaps of commuters to the city and are beautiful places. Good rental returns but also lovely, lovely places to live.
We went 100% finance to get our house, the only way we could. Yes, our mortgage repayments are higher than normal, but that's for short term (and was a bit longer because we fixed them for five years). We're looking at refinancing early next year and are anticipating that our repayments will drop by around $100 per week. But by doing it when we did, we bought our house and land package for $249,000 in 2006. House and land packages (off the plan) are now selling around here for $350,000 and our house has been valued (without being seen) at around $380,000. So yeah, no regrets from us. I'd jump in as soon as you can to get the most return.
i would wait. keep saving. the bigger your deposit, the better.....but...that only works if you are good savers. if you are going to waste the money then you are better off buying now and paying a mortgage off iykwim?
Frankston has great rental returns. i think you would be much happier out east though
IMHO - Don't bother trying to 'time the market'. And DON"T listen to anything 'Koche' has to say on the issue of property!
I am making an assumption you are looking at buying purely as an owner occupier, and have no interest in property as an investment. I would suggest that while you are in a position to save to do so. A bigger deposit is going to help. LMI is a large expense, there is nothing wrong with paying this expense if you have too, or if it makes sense financially (ie, from an investment perspective), but if you can avoid it, you will literally be saving yourself Thousands of $$$$$. Not to mention the hassle of dealing with the LMI companies, and living in fear until complete approval by them is granted that they will insure you, whilst jumping through endless hoops and rediculous requests for paperwork they should alrady have (can you tell, I've deal with them on a couple of occaisions?? ).
A 20% deposit + approx another 5% for purchasing costs, is the best position to be in. It gives you alot more flexibility in terms of choosing loan products and intitutions, as well as with negotiating discounts or getting a property that comes slightly under value to what you might have predicted or hoped. It also means that you can either get a slightly more expensive place then otherwise (ie, max out your servicibility) or have less debt to the bank and thus lesser repayments.
Of course if you happen across something fabulous while you are still saving that larger deposit, you can always change your mind.
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