- June 11, 2024
- Posted by: legaleseblogger
- Category: Related News
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Financial Decision Making as Career Climbers
My partner and I have been fortunate enough to experience a significant boost in our respective careers. Our combined income now stands at around $350K. With this newfound financial stability, we are considering taking the leap into homeownership and potentially securing a loan of up to $1.7 million. In the neighborhood we have our eye on, this budget would secure us a standard 3 to 4 bedroom home, nothing too extravagant.
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Before making any decisions, we are seeking advice on whether we should maximize our borrowing capacity. While our current expenses and day-to-day living costs can accommodate this loan amount, we are concerned about leaving little room for unexpected expenses or other financial goals.
Utilizing the AI Legalese Decoder could provide us with valuable insights into the terms and conditions of various loan options. By analyzing the fine print and legal jargon of different mortgage offers, we can make a more informed decision about how much to borrow and what repayment terms to consider.
Balancing Homeownership Dreams with Financial Prudence
Alternatively, we are also contemplating the idea of purchasing a more affordable home. This option may require us to invest in a second car or allocate funds towards improving the property to make it more livable. While this could lower our mortgage amount and potentially provide more financial flexibility, we are weighing the pros and cons of this trade-off.
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In addition to our monthly budget for essentials such as food, petrol, and insurance, we are also factoring in a surplus of $1000 for savings. Furthermore, my quarterly bonus of $17K gross is an extra source of income that could boost our savings potential. With the help of the AI Legalese Decoder, we can accurately analyze our financial situation and determine how best to allocate our resources for optimal financial security.
Despite potentially accessing better interest rates due to my partner’s connections, the prospect of taking on such a substantial mortgage still feels daunting. The AI Legalese Decoder can assist us in comparing different loan offers, understanding the legal implications of each option, and ultimately making a well-informed decision that aligns with our financial goals and aspirations.
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Borrowing the maximum you can l leaves no room for problems. What do you do if one of you can’t work anymore due to accident, or illness? What happens if one of you loses a job and can’t immediately get one at the same pay rate?
Is there room for much pay growth?
A lot of people that borrow a lot are early in their careers and have plenty of room to grow.
The total cost of taking out a loan over 25-30 years is huge. Have you looked at how much you would be paying in interest for that amount vs spending less, paying it off quickly and then doing the same thing again to get the house you really want. At that kind of price you’re probably easily saving yourself a million dollars over the next 25+ years.
Gotta agree that the bank’s max and your max are likely not the same number. Personally, I ended up buying a house about 20% cheaper than what the bank said I could. If I took the bank max – it would be rice and beans for me for the next 30 years.
There’s a difference between what the bank will let you borrow and what is actually affordable for your personal circumstance. Only you can really know what level of debt you are comfortable with.
I’d sit down and write out a budget with your anticipated payments at the current interest rates. I’d also factor in your future plans (kids, major upcoming expenses, etc.)
How much of a deposit do you have saved? Do you intend to have kids?
The interest cost is going to be around 9k per month for the first 5 years, 140k pre tax salary. 2.3m in interest over the term of the loan.
https://www.mikepero.co.nz/mortgages/calculators/loan-repayments
As someone with a high household income and a big mortgage, paying interest that well exceeds rent for a similar property property doesn’t feel like a great use of funds. One advantage of buying a nicer house though is its easier to sell, which means you can always be mortgage free again quickly.
Having owned a crappy house with a small mortgage and a nicer house with a big mortgage I would just save a bigger deposit to reduce your interest expense and buy when you can get something you want to live in. Buying a house seems like an amazing achievement but once you do it the shine comes off a bit and you realise you can actually live without it.
Sounds like a loan of this size is still going to stretch your budget. In this economic and political climate I’d buy the cheaper home. Consider the implication of one (or both) of you lose your job in the next couple of years?
I would buy something below max, to live comfortably and enable you to put extra in your mortgage every week or month. You will save yourself hundreds of thousands in interest payments..
Imo you gotta be out of your mind to take a $1.7m loan even if you were earning 350k each. That’s nearly 2k per week in interest alone plus you’ll have rates on top of that.
You could rent on the upper end of the market for $1500 and still be up $500pw. If it were me I’d buy something much more affordable and slowly move up the property ladder rather to avoid large interest.
I assume you’re relatively young since it’s your first home. If you have decades ahead of you, you should make yourself comfortable in a modest home and invest. Decades of profit and compounding interest from index or etf funds (or whatever you want) would set you up for a much better time later in life than if 100k pa goes down the drain.
$60kpa over 30 years turns into 6.14M at a modest 7% average return. The average market return to date is around 10% that’d be $11.4M.
My wife and I were on 380k combined and were thinking of upgrading from 900k house to 1.6. We decided it was surplus and much more of a want than a need.
Few weeks ago her contract job got wiped and we’ve gone down by 100k. Now we are VERY happy we didn’t buy more and are focused on killing our 140k mortgage.
Food for thought for you. Do you NEED 1.7m and what happens if something happens in your earnings?
You gotta leave room for situations like unemployment.
Different banks will give different answers to that question. A $5k second car is going to be a better financial decision than maxing out what you could borrow and really stretch yourself.
1.7mil for a stock standard home.
You are either in Auckland, Queenstown or Wanaka. Can’t be too many other places that provide that.
But anyway, I wouldn’t buy a home that I couldn’t see myself paying off in 10-15 years or less.
Similar situation but we did the opposite, minimized the amount borrowed as much as possible. Being mortgage free quickly will open many options down the road for us.
There are good arguments to borrow more and use leverage, it depends on your risk profile.
Borrow as little as possible, get it paid off in 5 years and buy another. Delayed gratification… The more you borrow the more you pay to the bank. Which is a waste of money.
Considered renting a house in that neighborhood and buying an investment elsewhere to “get on the ladder”? As long as your rent is less than $2k per week then you’d likely be better off.
Take an interest in finance, crunch the numbers, think ahead, and don’t rush purchasing.
What kind of job do u have to get a 68k bonus p.a?
That’s basically my yearly salary 😭
Don’t borrow the full amount. What if someone gets cancer and loses their job overnight… I know how it goes. Luckily I wasn’t over leveraged. If we were we would have been fucked
We’ve got roughly the same household income, and I don’t think it’s good to maximise that 1.7M. You never know how high the rates can go, or if you’ll lose a job, or a personal emergency.
Happy to help you look if it’s in Auckland – some good buys going on right now. Maybe start smaller and increase over time. It’s up to you what level you want to commit to. 😊
I always try to max borrowings but not use it. My last house, I had a $200k revolving loan that I didn’t draw on.