With his own parents struggling to make ends meet when he was growing up, Brisbane-based marketing manager, Alex, says owning a home has been a goal of his since he was 16.
He toyed with starting his own business but hit a wall with the banks. “I found nobody was really interested in helping me come up with the cash to do that without any kind of collateral, without any kind of security,” he says. “So it dawned on me, that first goal I had when I was 16 is still the right way to start: it’s a cornerstone. Nobody really takes you seriously until you have that property to back you.”
About 18 months ago, Alex met his partner, Prue, who was also on the same trajectory. Her parents are long-time property investors and have owned a number of properties across South-East Queensland. “Their advice was, ‘get a feel for the market first. Go find out what your money can buy’,” says Alex.
“It’s absolutely about making sacrifices. If buying property is one of your goals, it needs to come first.”
Alex, 24, says he really only started saving for a home in early 2016, once he started working full time. He was studying at the same time. “It was a massive, massive stress but it was also one of the biggest learnings of my life: managing my time,” he says.
In order to save for a deposit, he knew he had to be frugal with his money. He budgeted heavily, putting away the money he wanted to save first, then putting aside enough to cover rent and groceries. Anything left over, he allowed himself to spend.
“It’s absolutely about making sacrifices,” he says. “Everybody wants a nice car and to go out for dinner multiple times a week or a night out every weekend, but if buying property is one of your goals, it needs to come first.
“By no means do I mean lock yourself in a room to save money. You’ve got to find the balance. It’s like an elastic band effect, right? When you push or pull too hard, you will snap back … put the savings away first; spend after.”
He also looked at other ways he could make some cash, such as casual work on the weekend. “You can’t be too proud – especially as house prices keep on going up and up and getting further out of reach. If you want to get in and soon, all those little bits and pieces count.”
Alex was able to save 60% of his wage each week to finally came up with enough cash for a deposit.
Read: Tips to help you save for a home
While Alex and Prue were pushing each other to save as a couple, because they hadn’t been together that long, their plan was actually to buy separately.
But when Alex approached his bank, he hit a roadblock. Despite having taken out a couple of personal loans with them in the past, “they weren’t really coming to the party,” says Alex. “They were pretty strict on the LVR part.
Read: Explaining Loan to Value Ratios (LVR)
“On top of that, and I was pretty blown away by this, but basically because I’ve been with my partner for a year and a half, they just said, ‘unfortunately, having a partner is a liability. If your partner isn’t going on the loan, you don’t have enough money.”
Because Alex and Prue were living together, if Alex was to take out a loan on his own, Prue would be counted as a dependent. Every dependent you add on is going to reduce your borrowing power as dependents come with their own set of expenses. (Children are treated as dependents as they come with living expenses and school costs, for example).
Each lender has a slightly different way of working out living expenses and factoring dependents into one’s loan amount, but Alex’s bank said they would factor in an extra 30% to the cost of his living expenses and decrease his borrowing ability, “‘because if your partner ever went without work, you’d be expected to take care of her’,” explains Alex.
Rather than delay getting into the market any longer, Alex and Prue decided to take out a loan together. Combining their savings meant their deposit was much larger and they had two salaries with which to apply for a loan.
By this stage, Alex was talking to a broker. “I looked into the way brokers operate and, at the end of the day, they only have a couple of products that they really want to push – whether it’s because it gives them a better commission or that’s all they have access to.”
They had been property hunting for about six months and had found something worth putting an offer on.
“We were trying to get a pre-approval and the loan that [our broker] had selected to apply for – the bank really took their sweet, sweet time,” says Alex. “The broker had told us how much she was trying to push it through, but nothing was really happening.”
Alex decided they needed a backup plan. He was reading The Courier-Mail one day when he came across a reference to UNO Home Loans and decided to get in touch.
“I came to UNO quite late in the piece and said, ‘Listen, we’ve already got a broker and we’ve already got something in the works but we just want to find out our options’.” Alex spoke to Jessicaanne and Paul, then Remonda who handled the settlement process.
“And across that time we felt that having a dedicated rep for each step was the right approach. It was very quick, very efficient,” he says.
Alex and Prue ended up getting conditional approval for both loans. “Because UNO and ING had shown they were very efficient, very customer service-oriented, and we believe had the better offer, it was an easy decision,” says Alex. “We’re big fans of ING so that swayed our vote as well.”
Alex says he can’t speak highly enough of Remonda’s service. “Oftentimes our conveyancer was actually atrocious with her availability and guiding us as first home owners through the process, so Remonda would often act in that role. And she probably didn’t have to.”
While Alex and Prue were hoping they might be able to squeeze into the inner ring of Brisbane to buy, they would have been really stretching themselves, in addition to paying Lenders Mortgage Insurance.
Read: What is Lenders Mortgage Insurance (LMI)?
“LMI is somewhat of a fact of life for young people now.”
“LMI is somewhat of a fact of life for young people now,” says Alex. “But a 5% deposit is not exactly what you think it is. Say if you buy a $700,000 property, you might think you’ve got to have a minimum deposit of $35,000. But in reality, it’s $35,000 plus the LMI, plus legal costs, plus this and that, so you’re probably looking at something closer to the original 10% that you would have thought you needed for a deposit.
“You probably need to add $20,000 or $30,000 extra on top of a 5% deposit to actually acquire a house,” he offers by way of advice to others.
Alex and Prue dropped their limit back to under $550,000, which also made them eligible for a stamp duty concession. That changed the game a little bit.
“Everyone focuses on the First Home Owner Grant and a new property is great and all, but it’s often in areas that are developing – 20, 30 kilometres or more outside the CBD. Not a lot of people know that the first home owners concession still makes about a $15,000 difference.”
(Queenslanders can claim a first home concession for stamp duty when buying their first home if the home is valued under $550,000.)
Read: Stamp duty concessions for first home buyers
From the initial application to unconditional approval, Alex says the process took less than two weeks with UNO. “We just said, ‘Hey, how quickly can we make it happen?’ We had seven-day terms on our contract. The property was supposed to go to auction but we actually went private treaty on it, which was great as we weren’t feeling very confident about the auction process being first home buyers.”
Alex and Prue ended up buying a place about 20 minutes from the city in Wynnum, a short 15 minutes drive to the airport and with the potential to become a major hub. “And you’ve got the Bayside breezes. It’s the one of the only coastal towns in Metropolitan Brisbane,” Alex says.
Alex and Prue are living in their new home for now, but are thinking it could become the cornerstone of a portfolio, or their own business. “We’re both marketers and we would love to own our own agency or whatever it may be,” says Alex. “It’s something that not only can house a future family if we want, we could also make it into a great investment. It just ticks all the boxes.”
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