Refinancing to get ahead Choice Case Study
the power of having a plan in place
Robert & Melisa came in to our office in early September 2014 to see what they needed to do to be in a position to purchase a new home within the next twelve months. They already had a one bedroom investment property in Armadale, which we’d helped them purchase five years earlier, and were renting a small apartment themselves in Toorak. Despite their combined income of over $230,000 per annum they had only saved $30,000 between them over the last five years.
Like many couples in their early thirties, they had no real grasp of their expenses and after going through their bank statements we discovered they were spending A LOT on eating out and other luxuries.
We spent a lot of time discussing their comfort levels for future loan repayments, and after taking into consideration the fact that they may want to start a family in the next few years, they decided that they would like to purchase for around the $600,000 mark. This meant they needed a minimum of $110,000 in savings, so still needed to come up with another $80,000 before they could start seriously house shopping!
We ordered a valuation on their current property and due to the substantial increase since they bought it, found they could borrow another $45,000 against that, which they decided to do to jump start their savings campaign. We also discovered that their current home loan was on a standard variable rate with no discounts, so as part of the initial process we refinanced their current debt of $345,000 saving them over $5,200 per year in interest.
This still meant that they needed to save another $35,000 though before they could potentially buy their new dream home. They set themselves a realistic target of saving $4,000 per month meaning they should have been in a position to buy by mid-2015.
However, within just 4 months they had saved a whopping $30,000 (which had previously taken them as many years!)
With their available funds now sitting at a respectable $105,000 they made an offer on a house in Yarraville for $585,000 and moved in in early February 2015, saving a decent cash buffer during the settlement period!
The moral of the story – Don’t wait until you think you have enough to purchase a property before consulting a mortgage broker. By finding out exactly what you need to do upfront and then putting a clear plan in place you’ll reach your end goal much sooner!