# How much stability do you need to take on a mortgage?



## Tyler Durden (30 March 2014)

Taking on a mortgage has become somewhat of a _possibility_ for me given I recently signed a three year contract with my current work place. I was previously on a one year contract which was due to end next month, and really didn't have much of an idea as to what to do after that.

Call me pessimistic, but at this stage, I proceed on the basis that I may not get another extension after the three years, or I may not find another job after that. In that scenario, it would be really risky to take on a mortgage. 

On the other one, some would say "you've got years of experience, you'd have no problems finding another job", and so if one were to assume that, then I probably could take on a mortgage.

So I was just wondering if this has ever been an issue for others here? How much security and stability do you require for yourself before taking on a mortgage? Am I being too risk averse, or am I being somewhat sensible?


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## bellenuit (30 March 2014)

Tyler Durden said:


> Taking on a mortgage has become somewhat of a _possibility_ for me given I recently signed a three year contract with my current work place. I was previously on a one year contract which was due to end next month, and really didn't have much of an idea as to what to do after that.
> 
> Call me pessimistic, but at this stage, I proceed on the basis that I may not get another extension after the three years, or I may not find another job after that. In that scenario, it would be really risky to take on a mortgage.
> 
> ...




The days of a lifetime secure job are well gone, so no one would get to own their own home if they are not willing to take a risk and jump on board when things are good. If you chose the property wisely, based on forecasts I have read, it would seem you might be able to break even after 3 years if you were to lose your job and were forced to sell. If you get to keep your job and the housing price trend continues, in a further few years you should have built up some decent equity in the home.

What is your status at present? Do you rent or do you live with your parents/other family? If the latter, then it might be worth buying an investment property and continuing to live at home until you feel more secure. That way you have the tenants helping you pay the mortgage.


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## macca (31 March 2014)

Lenders like stability, contracts are a way of life and given you have just signed a 3 year one, now would be the perfect time to apply for a loan 

The best real estate forum in my opinion is Somersoft, spend a lot of time reading there and you can learn a lot in a short space of time, either investing or buying a home.

http://somersoft.com/forums/

I would add that if someone on there asks about stock forums I recommend ASF, it has a similar feel to here in that it is both sensible and helpful.


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## DB008 (31 March 2014)

bellenuit said:


> The days of a lifetime secure job are well gone




This.

Full time, part time, casual. It's all the same. Job security is gone now days.

Your company can declare bankruptcy, go broke for a number of reasons, buy-out, etc etc...

Once you get the mortgage, your only responsibility it to make the repayments. The banks couldn't care less what you do. Years ago, when I did FIFO in WA, l worked my ass off for a number of years, then had 6+ months off. As long as you make the repayments, it's all that counts.


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## sptrawler (31 March 2014)

DB008 said:


> This.
> 
> Full time, part time, casual. It's all the same. Job security is gone now days.
> 
> ...




That is exactly right, also if you buy to a sensible budget it becomes as cheap as renting.
Your a young bloke, worst house, best suburb, as close to ammenities as possible. 
Then work your **** off value adding.

In three years you should have a lot more equity in it, and you should have added more value to it.
You really make the money on a house when you buy it, at the right price.IMO
As far as the stability question goes, you have to live somewhere, whether renting or buying, you have to find the rent or the house payment.


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## skc (31 March 2014)

Tyler Durden said:


> Taking on a mortgage has become somewhat of a _possibility_ for me given I recently signed a three year contract with my current work place. I was previously on a one year contract which was due to end next month, and really didn't have much of an idea as to what to do after that.
> 
> Call me pessimistic, but at this stage, I proceed on the basis that I may not get another extension after the three years, or I may not find another job after that. In that scenario, it would be really risky to take on a mortgage.
> 
> ...




Without knowing your specific circumstances... industry, experience, reputation, spending/saving habits, assets etc etc, no one here can give you specific advice on whether you are being too risk adverse or not. But, as others have said, your concerns are not unique.

So what happens if you are unable to meet your repayments 3 years down the track? You won't lose everything and there may be other ways around it. E.g. rent out the house and rent somewhere cheap yourself... you may find that way you can still earn the income needed to support the loan. You might sell the place yourself before the banks do it for you, and extract a price that is above what you owe the bank (and what you've paid for the house + transaction costs). Or you might find Mrs Right and have a second income in the family to tie things over. 

Bottom line is... It's prudent to consider downside scenarios in any investment so you are doing the right thing. But you should also assess what you can actually do to manage the situation as well.


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## johenmo (31 March 2014)

sptrawler said:


> You really make the money on a house when you buy it, at the right price.IMO.





For the most part yes.  paying too much comes straight from your pocket.  

Depending on circumstances, you can always get housemates.  Know a few who did that & took many years off the mortgage.  The housemate payments went straight to the principal.

good luck.


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## Smurf1976 (31 March 2014)

If you're in a role with skills that are transferable to other employers (eg any job that isn't truly unique to a single employer) then that's good enough for any normal lender since you've got a high chance of getting another job if the current one comes to an end.

Add in that you have a 3 year contract and, assuming the company itself isn't commonly known to be on the edge of collapse, that's about as secure as it gets these days. It's more than good enough for most lenders.

From a personal perspective, obviously the risk is not zero but it's unlikely to get much lower. If you always waited for there to be no risk before doing anything, well then you'd never do anything....


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## Tyler Durden (31 March 2014)

Hey thanks for all the replies, I'm currently living with my folks, wasn't seeking specific advice, but just wanted to see how 'long term' people considered a three year contract to be, and whether that might be sufficient (in realistic terms, not to satisfy bank standards) to ground a mortgage.

Also would be interested to hear of other people's work status at the time they got their first mortgage


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## CanOz (31 March 2014)

macca said:


> Lenders like stability, contracts are a way of life and given you have just signed a 3 year one, now would be the perfect time to apply for a loan
> 
> The best real estate forum in my opinion is Somersoft, spend a lot of time reading there and you can learn a lot in a short space of time, either investing or buying a home.
> 
> ...




Tough crowd...lol


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## macca (1 April 2014)

CanOz said:


> Tough crowd...lol




That is usually sent after spamming, flaming or trolling repeatedly (3 strikes I believe)


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## Joe Blow (1 April 2014)

macca said:


> I would add that if someone on there asks about stock forums I recommend ASF, it has a similar feel to here in that it is both sensible and helpful.




Macca, thank you for both your kind words and your support. ASF is struggling a little at the moment. Not only is traffic a little subdued due to our relentlessly unpredictable market, but we are currently fighting a defamation claim that was filed against us in Queensland's Supreme Court in December.

Times are a little tough right now and one way of helping ASF is to recommend it to others, as you have done. To others reading this post, if you have a blog or a website with a "Links" section, please consider adding a link to ASF, or recommending and linking to us on other forums when discussion turns to the stock market. Liking us on Facebook also helps to increase our visibility. Any support is sincerely appreciated.

Anyway, I don't want to take this thread off topic. Just wanted to thank you for your support, and let others know how they can help.


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## Smurf1976 (2 April 2014)

No doubt you can't comment on it for legal reasons, but it truly amazes me that anyone would launch a defamation claim against an online forum.

Against someone who posted on it possibly, but against the forum itself?

It's akin to someone putting up posters around the city on power poles, rubbish bins, post boxes, bus stops and so on. Then someone decides to sue the power company, city council, Australia post and the bus company due to the content of what someone else posted on their infrastructure. That seems truly absurd to me.

Anyway, that's just my thoughts and I assume you can't comment on it.


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## DB008 (2 April 2014)

Smurf1976 said:


> No doubt you can't comment on it for legal reasons, but it truly amazes me that anyone would launch a defamation claim against an online forum.
> 
> Against someone who posted on it possibly, but against the forum itself?
> 
> ...




+1

Crazy. Probably from crazy people who sound doggy/jealous to me.

I'd move ASF off-shore (USA or somewhere. Look at how long Silk Road went on for right under the FBI's noses) and fund it via bit-coins. Untraceable.


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## trainspotter (3 April 2014)

DB008 said:


> +1
> 
> Crazy. Probably from crazy people who sound dodgy/jealous to me.




It isn't Clive Palmer is it?  ("allegedly" just in case he is monitoring this thread)


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## Joe Blow (3 April 2014)

I didn't want to make this thread about the defamation claim, but I can confirm that it is not Clive Palmer. 

Rather, it is a company being run out of the Gold Coast (I know that probably comes as a surprise ) that claims to be making $500,000 a month by using professional telemarketers to sell memberships (think $X,XXX) to their "trading alerts" service. ASF is being sued because of a thread here on the forums that they claim contains defamatory statements. We are vigorously defending the case.

I can't say any more now, but trust me, when I can I will... and I will be telling everything.

Now, back to your scheduled programming, "How much stability do you need to take on a mortgage?" (Sorry Tyler!)


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## sydboy007 (18 April 2014)

I was 25 when I bought my home.  Had been working for just over 3 years and 2 years in that job.  Left 3.5 years later to a better paying job during the dot com craze.

Rented out a couple of the rooms to help pay the mortgage.  Never too big of a worry for me.  By the time my 3rd job was looking to move the jobs back to the USA I had enough equity in the house to rent it out nicely positively geared.  Now that it's paid off it's quite nice to still have the rental income and ability to start travelling at the pointy end of the plane.

DON'T over extend ie max 30% of income on repayments or find another property.  Maybe consider staying at home for the first few years and really hit the loan hard and get it down to a point where you know you would be positively geared.  Once you reach that then worries about job security are no longer particularly worrying 

If you can afford it buy a house rather than apartment as the land value component is greater and that's something developers can't make more of.

Have you thought about saving in other ways?  While there's so many non financial reasons for owning when you live, with rental yields so low, especially in Melbourne, it's still generally much cheaper to rent than buy when you take all the holding expenses of housing into consideration.  I often think that even with buying before the Sydney boom took off, I'd have been better to have continued with my share investing - most of the shares I bought are 8+ times higher now, whereas my house is just 3 times, and the dividend income would have been significant as well, but then have to weigh that against the rent I'd have been paying.  I'd certainly have a portfolio providing more than enough income to pay my living and travel expenses now, but I do like the stability of owning my own home.


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## qldfrog (18 April 2014)

same advice, don't over extend yourself and you will sleep well
In effect, renters are now subsidised by the lamdlord
you put your money in a term deposit at 4 % and after tax you get the same yield as an IP after costs

So if not to live in, I would consider other less risky ways (not put all money in the "never to ever fall as long as I do not look back before the 90ies australian housing market:")
But if you move and live in, it is as way a subtle way to force you to save..All depends on your approach to $

As for job seciurity, I have always longed for a change after 3 years in any company
3years is as good as you will ever get;
I am a contractor now, and contract length are really irrelevant 
Job security is a myth for many professions, mine included;
I have to say that Mrs right has a very stable position so we are spoiled: 
I make the big $ with high variability (ie sometimes I even have to stay home for months...ahh the pain )
while the Mrs bring the steady income banks like to give you a loan (until your asset based is enough for the job status  to become irrelevant) or you pay cash
Good luck in your future.


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## ROE (18 April 2014)

if you can pay much more than the minimum take the mortgage, put all those extra cash into repayment
to build yourself a buffer, you shouldn't be unemployed for long if you got skills and work hard.

I was in the same boat when I was younger in my 20s ..I actually did the reverse I have a secure job...

I took the mortgage then I went contracting where I get pay 2-3 times my salary...that extra money I throw in the mortgage for every year I contracting I have 1 year in advance payment...

I was never out of work and the cash keep piling up and I never looked back, debt get wiped out super fast.

These day stock market produce 1 time my salary when I starting out  I hope to increase this to 3-4 times in the next 2 decades


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## ROE (18 April 2014)

Joe Blow said:


> Macca, thank you for both your kind words and your support. ASF is struggling a little at the moment. Not only is traffic a little subdued due to our relentlessly unpredictable market, but we are currently fighting a defamation claim that was filed against us in Queensland's Supreme Court in December.




Put up a donation fund


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## pixel (18 April 2014)

Joe Blow said:


> if you have a blog or a website with a "Links" section, *please consider adding a link to ASF,*
> 
> Anyway, I don't want to take this thread off topic. Just wanted to thank you for your support, and let others know how they can help.




Done - actually, it's been there for years


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## pixel (18 April 2014)

ROE said:


> Put up a donation fund




Let them prove their claims.


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## Joe Blow (18 April 2014)

ROE said:


> Put up a donation fund




It's something I'm seriously considering. I know HC has done it and it may end up being necessary. ASF is subject to a lot of legal threats due to posted content and lawyers and barristers don't come cheap. It would be easy for me to simply remove all content that is complained about, and that would solve all of the legal problems, but it would compromise ASF's integrity and that's something I don't take lightly. I stand firm on the right of ASF members to post lawful content, even in the face of legal threats and intimidation.



pixel said:


> Done - actually, it's been there for years




Many thanks Pixel! Much appreciated. 



pixel said:


> Let them prove their claims.




Well, this is what they have to do. The problem is the legal process is drawn out and complicated: claims, applications, defences, amended claims, court hearings, affidavits; the list goes on. Before you know it, you've spent tens of thousands of dollars just to defend yourself. Sadly, the process favours those with deeper pockets.


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## RandR (19 April 2014)

To the original poster...

3 years is a long time these days in a job.

But the more important question, what is the purpose for you taking on a mortgage? PPOR? IP?

We took our first mortgage out a couple of years ago. I was in a volatile industry as far as employment, my partner had just moved to a new job and was still in probation. If you plan well and purchase well within your means it will go a long way to making you feel more comfortable. For us, we had a 20% deposit and the repayments (P+I) less than 25% of our pay. We did that deliberately to ensure that if 1 of us did lose our income it wouldn't be a problem.

If it is an IP, are you looking for something neutral to positively geared straight away or happy to negative gear for the first couple of years?


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## mabellemurphy (25 April 2014)

Yes i agree with you. The mortgage can pay with the tenants.


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