Deciding whether to buy a dream home is a major financial and lifestyle decision, particularly for young people who are also focused on long-term wealth building.
In this episode of Aussie FIRE, Dave and Hayden discuss a case study from a listener weighing up whether to buy a family home now or continue investing. Their conversation highlights key factors such as cash flow, financial priorities, and the unpredictability of the property market.
The case study: A couple's dilemma
The listener who wrote in to the podcast is part of a young couple in their late 20s living in Melbourne. They have strong financial foundations, with incomes of $90,000 and $160,000, respectively. They have $130,000 in an offset account , and $100,000 in ETFs. They also own a two-bedroom unit valued at $500,000 with a $380,000 mortgage, though they currently rent an apartment closer to the city.
Their main concern is housing affordability in Melbourne, particularly as they plan to have children in about five years. They outlined three potential options:
- Max out their borrowing capacity to buy a $1.2 million home.
- Sell their investment property and buy a $1.5 million home they’d be truly happy with.
- Continue investing and wait to see what they can afford in the future.
Weighing the options
Option 1: Keep renting and continue investing
From a purely financial perspective, this option may seem the most attractive. Dave notes that their current savings and investments, if continued at their current rate, could potentially grow to around $1 million in 10 years. Even if property prices rise significantly, they may be able to afford a family home in the future.
“If you’re able to save and invest a half decent amount on a yearly basis, I don’t think you have to worry about being priced out of the market," he says.
"You’re operating your finances in such a way that will ensure that you continue to get wealthier as a person, and you will be able to afford something in the future.”
Hayden adds a psychological perspective: many people feel anxious about delaying homeownership, but flexibility is key.
“I understand where that concern is coming from. But ... you’re already in the property market. It’s not like you completely miss out if the property market happens to grow significantly.”
Additionally, renting can allow for greater flexibility in location and lifestyle. While the idea of owning a home is appealing, renting in the meantime could provide the couple with more options, especially as their careers and personal lives evolve.
Renting also avoids the high transaction costs associated with buying and selling property . These include as stamp duty and agent fees, which can take a significant chunk out of savings.
Find out more in our articles ‘ Buying a home vs renting: which is smarter financially? ’ and ‘ How to calculate whether to rent or buy your home ’
Option 2: Buy a ‘good enough’ home for $1.2 million
This middle-ground approach may provide stability, but comes at a cost. A $1.2 million home would require a mortgage of around $1 million, with repayments of roughly $72,000 per year at a possible 6% interest rate.
Factoring in additional costs like rates and maintenance, their annual housing expenses could reach $80,000, significantly reducing their ability to invest. In this scenario, they’d still be able to save and invest a little, but it wouldn’t be at the same level as before.
Another consideration is whether this home would truly meet their needs long-term. If they purchase a property that they eventually outgrow, they may find themselves needing to move again in a few years, incurring additional costs and disruptions. If they opt for this route, they should ensure the home provides enough flexibility for their anticipated family needs.
Option 3: Buy the dream home for $1.5 million
If they sell their investment property to fund part of the purchase, this could reduce their mortgage burden. However, it would still be a stretch financially. With a $1.2 million mortgage at 6%, annual repayments would be about $86,000, pushing total housing costs close to $100,000 per year. This scenario would leave them with little to no surplus cash flow, limiting financial flexibility.
Hayden points out that a high mortgage can become a source of stress rather than financial security.
“This is an asset that's great and it's part of your wealth, [but] it's not liquid. On paper it's money, but it might not take the stress off you, which is a really important detail.”
Emotional vs. financial considerations
Hayden reflects on the emotional side of the decision, acknowledging that while numbers matter, the desire for homeownership isn’t purely logical. A house isn’t just an investment – it’s also about security, lifestyle, and stability, especially when you’re planning a family .
However, he warns against making big financial decisions based on fear.
“If you’re considering buying a home, think deeply about how certain you are of your future needs,” he says.
“If you have a strong conviction that you want a high-value home for the long term and are comfortable with the financial pressure, then it may be the right move. However, buying a home now is still a big commitment with uncertain outcomes."
It’s also worth remembering that job security and career progression can change over time. Locking into an expensive mortgage could limit career choices, such as the ability to take a lower-paying job with better work-life balance, start a business, or take parental leave without financial stress.
The impact of market uncertainty
Many people hesitate to invest or make property decisions because they are waiting for the “right moment”. But as Dave points out, timing the market is incredibly difficult.
“Even if housing booms now, housing never booms on a forever basis," he says.
"Even if the property market's growing quite quickly while you're saving, and it's a frustrating situation to be in, just understand that it won't last forever. If you're doing the right things with your finances, then you should be in a position in the future to buy something and get in the market."
The importance of long-term planning
A key takeaway from the discussion is that financial decisions should align with long-term goals rather than short-term market movements. Dave suggests that for those who are unsure, continuing to rent and invest may provide more flexibility.
“Even if you don’t choose to buy your dream house now, it doesn’t mean you can’t buy it at some point. If you choose the low-cost option now and put more of your money into investments to build your wealth, you actually get the best of both worlds," he says.
"Not only do you strengthen your financial position with more monthly surplus cash flow, but you also gain the ability to afford the home you want later without overextending yourself financially.”
Final thoughts
Ultimately, there’s no one-size-fits-all answer to whether someone should buy their dream home now or wait. The right decision depends on personal priorities, risk tolerance , and financial flexibility.
For this couple, the best path forward may be to continue investing while keeping an eye on their long-term housing needs. By maintaining a strong savings rate and growing their investment portfolio, they could put themselves in a position to afford the home they want without compromising their financial security. Alternatively, they may want that security now, and put their investing goals on hold as they find the right home. Like with all things personal finance, it's very personal.
We're always keen to hear your thoughts and topic suggestions, so hit us up at hello@aussiefirepod.com . Head over to Pearler for resources, calculators, and community insights that complement what we chat about on the show.
Until next time, keep dreaming big and living on your terms. Catch you on the next one, and happy long-term investing.
Dave and Hayden
