Financial Plan For Buying A House In Sydney

Investigation of Historical Income Data

1).  

Year	Price	Four Year Average	Price change Save Time On Research and Writing Hire a Pro to Write You a 100% Plagiarism-Free Paper. Get My Paper
2002	404
2003	474
2004	509
2005	494	470
2006	487	491	4.41%
2007	512	500	1.93%
2008	491	496	-0.92%
2009	508	499	0.72%
2010	603	528	5.84%
2011	567	542	2.61%
2012	608	572	5.42%
2013	670	612	7.07%
2014	759	651	6.34%
2015	878	729	11.97%
2016	919	806	10.66%
2017	978	883	9.53%
	Average		5.46%

                                                

The calculation conducted in the above table relatively represents the average value of property prices in Sydney, which could be used while drafting the overall financial plan for the client. The 4-year average price is relatively used to detect the overall changing prices of property in Sydney, which is then average it to identify the growth in property price. The growth values a relatively used to identify the future price change in property that will income in the next 20 years. This detection of the overall is essential to understand the level of expenses that will in curve by the client to buy a housing property in Sydney. With the help of the graph it could be identified that the property price but relatively increased from $0.98 million to $2.83 million in 20 years. Therefore, adequate financial planners to be conducted for the client so that she could attend the Australian dream of buying a house in Sydney (Baker & Lester, 2017).

2).

Year	Weekly Income	Yearly Income	Four Year Average	Price change
1994–95	$                     642	$           33,384
1995–96	$                     626	$           32,552
1996–97	$                     648	$           33,696
1997–98	$                     664	$           34,528	33,540
1999–2000	$                     692	$           35,984	34,190	1.94%
2000–01	$                     709	$           36,868	35,269	3.16%
2002–03	$                     726	$           37,752	36,283	2.88%
2003–04(a)	$                     806	$           41,912	38,129	5.09%
2005–06(a)	$                     870	$           45,240	40,443	6.07%
2007–08(a)	$                     994	$           51,688	44,148	9.16%
2009–10(a)	$                     981	$           51,012	47,463	7.51%
2011–12(a)	$                  1,015	$           52,780	50,180	5.72%
2013–14(a)	$                  1,046	$           54,392	52,468	4.56%
2015–16(a)	$                  1,070	$           55,640	53,456	1.88%
			Average	4.80%
			Growth in Income	4.80%

                                                   

The similar calculation as the 4-year average is relatively used in determining the income growth rate of salaried citizens in Sydney. This would eventually help in identifying the level of income that will increase for the client in future to support her purchase of housing property. From the calculation it is detected that an average of 4.8% growth rate in income is seen for the past 20 years, which would eventually help in growing the level of income for the client. The graph relatively represents the income growth anticipation of the client, where an increment of 0.08 million to 0.20 million is seen after 20 years (Abs.gov.au, 2018).

3).

 

Particulars	Monthly	Yearly
Salary	$      6,666.67	$   80,000.00
Expenses on Amenities	$      1,435.00	$   17,220.00
Expenses on rent	$         765.00	$     9,180.00
Total expense	$      2,200.00	$   26,400.00
Tax		$17,547.00
Savings	$      3,004.42	$   36,053.00

Particulars	Value
Max LVR	80%
Property Value	$  430,265.00
Loan From Bank	$  344,212.00
Deposit to bank	$    86,053.00

Both the calculations relatively help in understanding the level of savings that needs to be conducted by the client to buy the relevant housing property. Hence, from the valuation it could be identified that the client can buy the property with a value of $430,265 on the current savings that is made by her. Moreover, the monthly savings value is relatively at the levels of 3,004, which could eventually help the client to support mortgage payments on monthly basis. Adequate savings are conducted by the client after deducting all the relevant expenses and tax imposed by the Australian government (Baur & Heaney, 2017).

Calculation of Net Income and Monthly Repayment Capacity

4).

Particulars (With Insurance premium)	Value
Max LVR	99%
Property Value	$  850,000.00
Loan From Bank	$  840,952.00
Deposit to bank	$      9,048.00
Stamp Duty	$    39,478.00
Insurance Premium	$    37,527.00

Particulars (Without Insurance premium)	Value
Max LVR	80%
Property Value	$  428,875.00
Loan from Bank	$  343,100.00
Deposit to bank	$    85,775.00
Stamp Duty	$         278.00

Adequate impact of insurance premium is evaluated in the above table where the client could use the method for effectively minimising the overall LVR value and maximizing the property value. From the calculation it is detected that without the insurance premium a property value of $428,875, where the LVR value of at the level of 80%. However, conducting the loan with insurance premium would eventually allow the client to obtain a property with a value of $850,000, where the LVR is at 99%. Hence, it could be identified that with the use of insurance premium the client could effectively buy the adequate home to support her Australian dream (Chia, Li & Zheng, 2017).

5).

Year	Property price	Savings Target	20% upfront	Stamp duty	Difference
0	$        977,500	$           86,053	$                  195,500	$                  41,868	$       (151,315)
1	$     1,030,918	$         124,079	$                  206,184	$                  41,635	$       (123,740)
2	$     1,087,255	$         164,186	$                  217,451	$                  43,911	$         (97,175)
3	$     1,146,671	$         206,263	$                  229,334	$                  46,310	$         (69,381)
4	$     1,209,334	$         250,460	$                  241,867	$                  48,841	$         (40,248)
5	$     1,275,421	$         296,894	$                  255,084	$                  51,510	$           (9,700)
6	$     1,345,120	$         345,691	$                  269,024	$                  54,325	$          22,342
7	$     1,418,627	$         396,979	$                  283,725	$                  57,294	$          55,960
8	$     1,496,152	$         450,897	$                  299,230	$                  60,425	$          91,242
9	$     1,577,913	$         507,588	$                  315,583	$                  63,727	$        128,278
10	$     1,664,142	$         567,203	$                  332,828	$                  67,209	$        167,165
11	$     1,755,084	$         629,901	$                  351,017	$                  70,882	$        208,002
12	$     1,850,995	$         695,850	$                  370,199	$                  74,756	$        250,895
13	$     1,952,147	$         765,224	$                  390,429	$                  78,841	$        295,954
14	$     2,058,827	$         838,208	$                  411,765	$                  83,149	$        343,294
15	$     2,171,337	$         914,997	$                  434,267	$                  87,693	$        393,036
16	$     2,289,995	$         995,792	$                  457,999	$                  92,485	$        445,308
17	$     2,415,138	$      1,080,808	$                  483,028	$                  97,539	$        500,241
18	$     2,547,120	$      1,170,269	$                  509,424	$                102,870	$        557,976
19	$     2,686,314	$      1,264,412	$                  537,263	$                108,491	$        618,658
20	$     2,833,114	$      1,363,482	$                  566,623	$                114,420	$        682,439

Year	Property price	Savings Target	5% upfront	Insurance premium	Stamp duty	Amount
0	$        977,500	$           86,053	$     48,875	$                    37,537	$                  41,868	$   (42,227)
1	$     1,030,918	$         124,079	$     51,546	$                    39,588	$                  41,635	$     (8,691)
2	$     1,087,255	$         164,186	$     54,363	$                    41,752	$                  43,911	$    24,161
3	$     1,146,671	$         206,263	$     57,334	$                    44,033	$                  46,310	$    58,586
4	$     1,209,334	$         250,460	$     60,467	$                    46,440	$                  48,841	$    94,712
5	$     1,275,421	$         296,894	$     63,771	$                    48,977	$                  51,510	$  132,636
6	$     1,345,120	$         345,691	$     67,256	$                    51,654	$                  54,325	$  172,456
7	$     1,418,627	$         396,979	$     70,931	$                    54,477	$                  57,294	$  214,277
8	$     1,496,152	$         450,897	$     74,808	$                    57,454	$                  60,425	$  258,211
9	$     1,577,913	$         507,588	$     78,896	$                    60,593	$                  63,727	$  304,372
10	$     1,664,142	$         567,203	$     83,207	$                    63,905	$                  67,209	$  352,882

The tables relative Lee represent that under the 20% up front system the client could effectively by the property during 6-year, as adequate savings needs to be conducted before the purchase of Australian home. However, from the valuation could also be detected that under 5% upfront payment the client to effectively by the property during 2nd year, as Insurance premium is allowed by the bank for delivering the loan.

6).

	Property value	$             1,087,255
	Loan amount	$             1,032,892
Year	Interest rate	Mortgage Payment	Saved	Savings
3	3.65%	$37,701	$          76,078	$    38,377
4	3.65%	$37,701	$          92,644	$54,943
5	3.65%	$37,701	$        111,683	$73,982
6	7.00%	$72,302	$        133,325	$61,023

Year	Income	Expense	Tax	Net Income
0	$          80,000	$      17,220	$ 17,547	$     45,233
1	$          83,837	$      17,623	$ 18,794	$     47,420
2	$          87,858	$      18,035	$ 20,101	$     49,722
3	$          92,072	$      18,457	$ 21,698	$     51,916
4	$          96,488	$      18,889	$ 23,332	$     54,267
5	$        101,116	$      19,331	$ 25,044	$     56,740
6	$        105,966	$      19,784	$ 26,839	$     59,343
7	$        111,048	$      20,247	$ 28,719	$     62,082
8	$        116,374	$      20,720	$ 30,690	$     64,964
9	$        121,956	$      21,205	$ 32,755	$     67,995

Adequate calculations are conducted regarding the mortgage payment condition of the client if interest rates increased from 3.65% to 7%. Further from the valuation it is detected that during the fourth year after purchasing the property the interest rate will increase to 7%, which will increase the mortgage payment from $37,701 to $72.302. However, there is no problems which could be seen in paying the mortgage of the house after increment interest rates. Hence, it could be identified that the client could effectively support the high interest rates at the savings conducted on yearly basis (Gurran & Bramley, 2017).

7). The main problems that could be identified from the drafted plan is destinations that is conducted on behalf of the client. The relevant estimation such as the income of the client will eventually increase and there will be no problems related to her job. Therefore, any kind of economic crisis would eventually hamper the credibility of the client to sustain a job which is an essential part of the financial plan to support her Austrian dream (Hulse & Yates, 2017). Moreover, the changes and economic conditions, government policies and interest rates on Bank would eventually hamper the actual financial capability of the clients to support the mortgage payments. In these scenarios, the overall grafted portfolio would not be effective and not allow the client to successfully fulfil her Australian dream.

Reference:

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