Hi all,
Great forum. I would like experienced peoples' opinions on the following scenario. I am looking to buy my first property; either a duplex, villa, unit/apartment or townhouse. I am wondering if there are major problems with buying a 1 bedroom property. I have no children and do not plan to start a family in the short term and therefore a 1 bedroom property is big enough for my current needs. However I worried about it being a bad investment for capital growth or for being able to rent it out down the track. However by buying a 1 bedroom I can avoid mortgage insurance and obviously my repayments will be significantly less.Scenario 1:
Buy a 1 bedroom, 1 bathroom property
20% deposit
Therefore no mortgage insurance needed
1 bedroom is currently sufficient for my living requirements.Scenario 2:
Buy a 2 bedroom, 1 bathroom, seperate toilet property
Have less than 20% deposit
Therefore have to pay mortgage insurance.Thank you for your replies…
If your 1brm unit is greater than 50m2, then sure buy it – no problems.
There are problems trying to finance smaller than that.2brms are probably in better demand but good 1brm in the right location are fine too.
Or buy a 2 bed apartment, in a suburb a bit further out. ie similar price.
Ask your bank about their policy on lending for 1 bed apartments.
Banks are geneally conservative about lending for 1 bed apartments esp if less than 50 sq m.
Which caps your eventual sales price, and hence may limit your eventual capital gain.Thank you guys for your posts. Great!!
Personally, I wouldn't get too concerned about mortgage insurance and therefore wouldn't allow it to be the main factor that determines my decision.
It's a borrowing cost that can be depreciated over 5 years, and without it, we would all have to save 20% deposits to purchase a property
Like prop said as well, any 1 bedroom unit under 50m2 will be difficult to source finance for.
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
We have just divested ourselves of two 1-bedroom units and bought two 2-bedroom units instead. We've found that one bedroom units are more difficult to rent and have lower capital gain, hence the swap.
As a PPOR purchase, I would try to minimise the debt and certainly minimise any MI costs.
If it was an investment property, I would do the opposite.If a 1 bed flat is in a good location, suits your needs and you can borrow < 80% then it should not be an issue obtaining finance, especially for an owner occupier. The real issue on small units <50m2 is when you want to borrow > 80%, the MI's do not like them nor do most lenders either. You can get 80% finance for as small as 38m2 but the lender selection is limited.
For a PPOR, it is about lifestyle. If it suits you, more than likely it will suit similar tenants down the track.Good luck
Greg
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