Post to Facebook on 6/9/2019 9:01 AM
Commenting on “Melbourne home buyers borrowing up to $100,000 more are bidding up auction prices after bank rule change”
This blog does not show all the steps in calculations, but highlights the impact of paying extra over your budget for a property.
Just be mindful NOT to get into frenzy bidding at an auction. A property that can attract a bid $100,000 over the reserved price can only be explained that either it was a case of underquoting or the bidder had gone cuckoo just like the time before the real estate crash.
The Capital Improved Value CIV can be used as an estimate of the valuation of the property. If one bids well above the CIV, not only extra money is paid towards the mortgage interest, but also the General Council rate, Fire Levy, and Water rate.
The General Council rate is calculated by multiplying a factor by the CIV. This factor varies for different councils. City of Monash uses a factor of 0.0015835 while City of Knox uses a much higher factor of 0.0042.
If future CIV is to increase by extra $100,000, the General Rate in City of Monash will incur extra $158.35 while City of Knox $420.00. Assuming the $100,000 extra CIV remains constant for 30 years, the total comes to $4,614 and $$12,600 respectively. In fact this figure is a lot more if formula using compound interest is taken into consideration like mortgage interest.
What if the property is bidded $100,000 over $1,000,000, that is the final price is $1,100,000, then the extra stamp duty payable is $5,729 once.
According to ANZ loan calculator for an investment of extra $100,000 for 30 years at 5.53%, the extra repayment is $570 per month or $6,840 or $205,000 for the 30 years period.
These are the major expenses incur either once or during the duration of the loan.
I know many people never consider the impact, or to some think that it is too negligible to worry about. Well money in your pocket is always better than in someone else’s.
Thank you for reading.
Commenting on “Melbourne home buyers borrowing up to $100,000 more are bidding up auction prices after bank rule change”
This blog does not show all the steps in calculations, but highlights the impact of paying extra over your budget for a property.
Just be mindful NOT to get into frenzy bidding at an auction. A property that can attract a bid $100,000 over the reserved price can only be explained that either it was a case of underquoting or the bidder had gone cuckoo just like the time before the real estate crash.
The Capital Improved Value CIV can be used as an estimate of the valuation of the property. If one bids well above the CIV, not only extra money is paid towards the mortgage interest, but also the General Council rate, Fire Levy, and Water rate.
The General Council rate is calculated by multiplying a factor by the CIV. This factor varies for different councils. City of Monash uses a factor of 0.0015835 while City of Knox uses a much higher factor of 0.0042.
If future CIV is to increase by extra $100,000, the General Rate in City of Monash will incur extra $158.35 while City of Knox $420.00. Assuming the $100,000 extra CIV remains constant for 30 years, the total comes to $4,614 and $$12,600 respectively. In fact this figure is a lot more if formula using compound interest is taken into consideration like mortgage interest.
What if the property is bidded $100,000 over $1,000,000, that is the final price is $1,100,000, then the extra stamp duty payable is $5,729 once.
According to ANZ loan calculator for an investment of extra $100,000 for 30 years at 5.53%, the extra repayment is $570 per month or $6,840 or $205,000 for the 30 years period.
These are the major expenses incur either once or during the duration of the loan.
I know many people never consider the impact, or to some think that it is too negligible to worry about. Well money in your pocket is always better than in someone else’s.
Thank you for reading.
