Sunday, 3 August 2014

Blaugust 4, 2014 - Hopes, Home Loans, and Housemates

As you are no doubt aware, renting sucks. I'm watching my wages disappear into somebody else's pocket every fortnight, while I have to put up with the television antenna being broken for the first six months of my tenancy, the air conditioner in the bedroom being broken and the replacement still sitting in its boxes, and the fire place still being unsafe to use, all despite bringing these things up with the landlord shortly after moving in.

I've brought these things up multiple times with the landlord and the agent, and things do eventually get done, but it is almost always after I had needed them. I know the landlord has a busy life, and I know the agent tries his best to get in touch with the landlord and get things done, and I guess I can manage the cost of heating the house using a little air-conditioner at one end and one of those oil column heaters in my bedroom. I know if I took it further I'd just be being a pain in someone else's arse, and I hate doing that. Hmmm... remind me to talk about that in another post: "Habitually Being Super Accommodating To Other People Who Are Actually Taking The Piss, And Defending Them To Others When People Point Out The Problems With Their Behaviour To Me" (I'll have to work on that title a bit).

Renting sucks because any changes you might want to make to the property yourself (prominently including the garden) have to be approved, and your efforts aren't yours to enjoy in the long term. Again, money disappearing into someone else's pocket.

Last but not least renting sucks because you often can't have pets, including in my current place. This sucks for a guy who misses the heck out of his pet chickens. Seriously, even after seven months I barely go an hour without thinking about them (it worries me slightly). The ridiculous little birds were so comforting to have around and I love them dearly.

It is clear I need to get away from renting as soon as I can and into a home of my own, which will mean a home loan. So how much will I need to borrow? What do I want to buy? Long-term, I want a big slab of land to play with. I'm talking 4 hectares minimum, here, though I'd be happier with 20 plus. Something I could walk out into the middle of and not hear cars passing. Short term I'd be quite happy with something in a fairly quiet suburb or country town convenient for work, with a reasonably robust, well planned, house. It would need enough garden to grow some veggies and a few colourful natives to make things cheerful, and have some chickens wandering the yard.

I've been looking at real estate websites to get an idea of the costs involved for both options. There are a few great big slabs of empty land ranging from 13 to 74 hectares around the Kanmantoo, Callington, Monarto areas at the moment, ranging from $200,000 for the biggest to $350,000 to the smallest. It seems that size and price do not correlate. When it comes to rural land prices, things to consider include rainfall, soil type, whether or not you can get mains water and electricity, and how long it takes you to drive to Adelaide/regional centres.

On top of that I'd have building costs, and they seem pretty steep. A rough-as-guts estimate, based on some cursory web browsing, would be about $150,000 - $200,000 for something that would suit the long term. Alternatively I could buy something with a house already on it. There is a nice 27 hectare block with a "timber clad cottage" next to Ferries-McDonald National Park that is going for $410,000. It has sheds, rainwater tanks, and solar set up already. It looks really, really nice. If you look at this post in the future it will likely have vanished, but for now check it out here. I'd have to check out the soil and see if I could manage to do the things that I want (it isn't exactly prime vegetable growing land, but where there is a will there is a way). Pity I can't snap it up (yes, I know I just said 'where there is a will there is a way' a sentence ago, shut up).

So those are the expensive ways I could jump. The shorter-term, more achievable alternative would be to get a small block or a house in a township or suburb. There is some eminently liveable stuff out there starting at about $210,000 for a timber-clad house on a decent block in Callington, $300,000 for something suitable but better situated in Nairne. There are a few house and land packages around too, starting at $250,000ish if I want to contribute to ruining the small town aesthetic turning it into just another treeless suburb with a poorly-designed carbon-copy house.

The big blocks have the advantage of being what I want, sooner. I could also look at livestock agistment to help with my finances. They have the disadvantage of being further from work and distinctly unlikely to get ADSL. They are also possibly unaffordable.

The smaller blocks have the advantage of being in a sane price-range, though the idea of paying $100,000 for an 800 square metre block rankles when $300,000 buys you 283 of those all stuck together. They also get ADSL, and easier access to the freeway and work (in some cases).

I've looked at interest rates and what the lenders are offering, and the Commonwealth Bank seems pretty good for this thought exercise. Their variable rate is 5.2%pa today, and fixed term rates are as low as 4.84% for two years. So I'll use their loan calculator and have a look at what my repayments would be. Remember, these repayments include both interest and an amount toward paying back the principal amount of the loan.

Variable 5.2%
$210,000: $577/fortnight
$250,000: $687/fortnight
$300,000: $824/fortnight
$400,000: $1,099/fortnight

Fixed 4.84% for two years
$210,000: $554/fortnight
$250,000: $659/fortnight
$300,000: $791/fortnight
$400,000: $1,055/fortnight
Fixed 4.99% for five years

$210,000: $564/fortnight
$250,000: $671/fortnight
$300,000: $805/fortnight
$400,000: $1,073/fortnight

I'm currently paying $580/fortnight in rent, and getting by. So with a little economising I'm sure I could handle the repayments on a $250,000 loan without much drama. The reason I'm merely 'getting by' would be the legal fees to do with my separation, which have several times been as high as $1800 for the month (much more than my rent!). This, combined with the costs involved in setting up a home of my own have bled me absolutely dry. Once those costs are in the past, which I hope will be soon, my earnings will stretch much further and I'd say a $300,000 loan wouldn't be unaffordable at all, though $400,000 would still be a stretch.

This assumes steady interest rates. If I go with a variable loan and the rate skyrockets, I might find myself over-extended if I'm not careful. But if I go with a fixed rate loan I won't be able to repay more than the set amount. Repaying extra is extremely valuable, especially at the start, as it dramatically reduces the amount you have to pay in the long run, and can get the loan paid off much sooner. And who knows? Interest rates might fall further, though I very much doubt it.

I start wondering that if I got a loan for $300,000 fixed for five years to get something nice, and the interest rate skyrocketed in the meantime, would I be able to afford whatever the new rate was at the end of the fixed rate period? My shoddy calculations tell me I'd only have paid off about $24,000 at that point, leaving me with a $276,000 loan and a 10% interest rate. A nasty scenario, especially if I'm still single and haven't increased my earnings, neither of which I hope will be the case.

Purely looking at the money for a moment I'd much rather take a smaller loan, pay it off faster than the banks would like me to (as it cuts into their profits; they want you to be a lifer!), and then leverage my equity into something better. But because I'm an absolute sucker for nice things, I can't decide.

But there is no reason to decide just yet. I'm currently operating on around about $32,000 in debt to my mother for my car and a couple of other little things, and likely owe my lawyer about $3,600 for this month and the last, all of which should clear up very soon when the settlement goes through (Ahhh, ever the optimist, I've been saying that all year!). The settlement will put me back to roughly zero dollars. So I have no deposit. I'm not eligible for any of the first home buyer's grants because when you live with someone you are in a relationship with and then marry, who owns the house, and you contribute to the mortgage, it is your house too. Who knew? So with no deposit and no grant to cover that, I'm going to be saving my pennies for a while yet.

To increase the speed at which I can afford, and then pay off, this frustratingly hypothetical loan I'm thinking that I should get a housemate. Even a little bit a week plus a share of the bills would go a long, long way. It will be interesting to find someone I'll be able to stand living with. And it will be interesting to find a housemate who can stand to live with me.

TL;DR: Very poor examination of home loans, I can't afford anything yet, I can't stop thinking about it, and I'm considering getting a housemate to speed things up. Let me know if you are interested.


  1. You're still living way out North, right?
    I've got a couple of guys looking for places that are down South, but don't know of anyone out your way...I'll keep my eyes peeled.

    1. Nope, Nairne. The magical land of Nairnia. Exit the freeway, then go through the wardrobe, I mean Littlehampton, to get here.