Ask Paul: I'm 25, how can I buy my first home?


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Q. I'm 25 and my partner is 30. I earn $75,000 with $40,000 in super, while he earns $85,000 (also with $40,000 in super).

We can save about $75,000 each year, and we have invested $135,000 in shares and hold $70,000 in cash. Our only debt is my HECS ($20,000).

Although we're renting in a rural location, we'd like to get into the housing market and buy a house somewhere more urban in around five years. But we're stuck on how to get there.

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Should we continue investing our spare cash in shares (and sell them when we're ready to buy a house) or start stashing the cash for the deposit?

If we do decide to continue investing in shares, should we sell only enough for a 20% deposit, or sell as much as possible to minimise our loan? - Frances

A. You two really are super savers, Frances. Good on you!

First, don't worry about the HECS debt - it is the cheapest loan you will ever have.

You already have a good deposit. Given you plan to buy in five years, we have the unknown situation of whether shares will outperform property over this time. I have no idea.

So given property is your goal, why not do your research and consider buying the property now? Historically, despite short-term ups and downs, there is more than an average chance both property and shares will be worth more in five years.

But with a property I suspect you will be comfortable borrowing a sensible amount to buy it. The rent will assist with your loan repayments. If you lose money on it, this loss will be deductible.

Stay away from property-flogging seminars, do your own research and I strongly suggest you talk to an accountant before you proceed.

With our growing population there will be demand pressures on well-located urban ?property. My view is to consider buying an investment property now.

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Paul Clitheroe AM is founder and editorial adviser of Money magazine. He is one of Australia's leading financial voices, responsible for bringing financial insight to Australians through personal finance books, the Money TV show, and this publication, which he established in 1999. Paul is the chair of the Australian Government Financial Literacy Board and is chairman of InvestSMART Financial Services. He is the chair of Financial Literacy at Macquarie University where he is also a Professor with the School of Business and Economics. Ask Paul your money question. Unfortunately Paul cannot respond to questions posted in the comments section. View our disclaimer.