It’s an undoubtedly exciting time but with media reports sensationalising skyrocketing property prices it’s easy for first homebuyers to become a little despondent at their chances. Purchase with confidence by following our tried and tested tips.
Budgeting Is Boring, But…
It’s absolutely essential. Deciding to buy a home is a big decision and it really requires lots of planning and a healthy dose of the financial savvies. Resist the urge to get swept up in the excitement or get in over your head. Sit down to map out your financial position and plot where you’d like to be when you sign your first purchase contract.
Do this by drawing up a solid and realistic budget that you can live with. Factor in the unexpected expenses that pop up (big and small) and allow yourself some breathing space when you draw up your budget, as life has a way of throwing financial surprises at you. Give yourself a realistic amount of time to save, and set some future dates to achievable savings figures so you stay on track.
Bump Up Your Deposit
Many lenders will go out of their way to attract the lucrative business of first homebuyers. This can be a good thing when you’re looking to get a foot on the property ladder, but don’t get caught in the trap of low deposit loans asking for a miniscule 5% deposit.
Saving at least a 20% deposit will protect you from hefty fees associated with low deposits. Mortgage insurance is generally slugged to purchasers who are borrowing high percentages of the asking price, and will add tens of thousands of dollars to your loan. Six months extra saving could make all the difference. Mortgage insurance is an avoidable cost – so avoid it!
Talk To Bankers And Brokers
When you’re getting down to the business end of saving, it’s important to start investigating loans in greater detail. If you’re a numbers person, by all means approach the banks directly and ask them to fix you up a competitive loan. If you have a good banking history with one organisation this may prove helpful when you’re applying for a home loan.
If numbers make you want to fall asleep mid-sentence, outsource this important task to a broker. Brokers research mortgages day in and day out and will be well positioned to provide expert advice to fit your unique situation.
Gaining loan pre-approval will be vital for when you finally hit the pavements and start hunting for your home. It will allow you to make offers with the confidence that you’ve got the borrowing power to back you up.
Factor In The Future
While it’s tempting to pull out a dream home wish list as long as your arm, the reality is that high cost of housing in Australia means most people will start out with something that is perhaps a little smaller, older, or further away than what they’d like. Be realistic about what you can afford, but consider your future plans in the process.
Smart homebuyers purchase for the future, looking for properties that will suit their lifestyle and financial plans down the track. Consider whether you’re in for investment purposes only, or if you’re looking for a property that has potential to become your family home with a little bit of love and a possible extension. Consider the growth history of homes in your desired area and think about how the area will work with your lifestyle in five or ten years’ time. Everyone is different and there is no ‘one size fits all’ solution for how your first home should look, or where it should be located.
Be Prepared For Sneaky Expenses
Finding a property you can afford and love is only half the battle. The really testing part about purchasing a home can be the endless fees and paperwork that follow quickly after.
First up you’ll want to do your homework to avoid buying a money pit. Set aside cash for building and pest inspections, along with solicitor fees to cover conveyance fees. You’ll also need to factor in the cost of taxes such as stamp duty, the upfront insurance requirements to protect your new asset, and any personal financial expenses like income protection or life insurance. All properties attract council rates, and of course body corporate payments will be required if you’re in a townhouse or apartment complex.
Purchasing a home can be a daunting experience, but it’s also a really rewarding experience. Nothing quite beats the feeling of cracking open a bottle of bubbly to celebrate the security of having a little patch of earth to call your own.