Top 5 Things You Must Do When Buying Your First Home
Buying our 1st home is The Great Australian Dream. When done correctly, it can be one of the best accomplishments anyone can experience. When done poorly or with little research, it can be one of the most painful decisions we can ever make. Top 5 things you must do when buying your 1st home:
Develop a habit of SAVING
If you decide to live in the home buy, then you must rely on your income to pay your mortgage repayments. You have no rental income to support you. It is important to feel comfortable with this idea - after all, if you’re short of funds one week, the banks won’t have much sympathy for you (they may smile in their TV ads, but fall behind on your repayments, and they’ll soon take possession of your property).
To give yourself the best chance of servicing your loan, try the following:
develop a habit of saving every week. Even if you are years away from buying a property, it is still a good idea to develop this habit. Put $50 away each week as soon as you get paid.
Save the amount of your mortgage repayments. If you know roughly you’ll be paying $300 a week in mortgage repayments, then set yourself the goal of saving this amount, say, a year before buying your property. Not only will this increase your savings, but will get you ready for having the actual commitment of having to pay the bank $300 per week, every week for the life of the loan
Save as much as you can 3-6 months prior to getting your loan. This is known as genuine savings. The banks want to see that you are able to save, and place particular importance on how much you have saved in the last 3 to 6 months. The more genuine savings you have, the greater the chances of gettig a loan
2. Have a VISION for the Property
The home you’re buying or plan to buy, is that your forever home? Do you plan to be there for the next 15-20 years? Will it be a home you want to raise kids in? Do you intend to live in it for a couple of years, and then move onto something bigger and better?
Having a vision for the property is important as it determines:
How much you are willing to spend. If it is your forever home, you may be more inclined to spend more and find a lender that will give you the maximum borrowing capacity.
If it is your forever home, you may be willing to spend money on a renovation to get it looking the way you want it to look
If you only want to live there for a couple years, you may not want all the bells and whistles, and as such may want to buy something a little less expensive or something slightly further out
3. Plan for a Change in Interest Rates
What happens when interest rates increase and your repayments go up? At the time of writing (May, 2021) interest rates are at hisotical lows, which means there is only one way for them to go - Up! Sure, this may not happen for a number of years, but eventually they will increase. Have you thought about what will happen if you have to pay an extra $50 a week in repayments?
It’s a smart idea to perform a little exercise: Determine how your budget will be impacted if you have to pay an extra $50 a week. Is there an expense you can eliminate or reduce to accomodate for this increase in repayments? What happens if your income does not rise by the amount you desire? Will you be able to afford the the additional cost of your loan?
4. Use a Mortgage Broker
I’m not just saying this because I’m writng for a mortgage brokerage! It’s a no brainer. A mortgage broker can take the headache out of getting a loan. They’ll examine your income and expenses, marry that with your short and long term goals, and then find and negotiate with a lender that is most suitable for you. The end result is that a broker will you save heaps of time and stress, and, most importantly save you $1000s of dollars in repayments.
5. Buying New House & Land Packages
We’re not saying House & Land packages are a bad decision, but you need to be mindful of a few things. House & Land packages are typically over-priced; you could easily pay $40 - $50,000 above what the package is actually worth. Developers invest a tonne of money in marketing such packages, and how do you think they recoup their costs? That’s right, by charging you more than they should.
Buying an established property that may be a little run down or not as new and fresh looking may be a better option than a House & Land package; the latter may look more fancy and welcoming, but you’ll be paying more than you should be.
If you would like to speak to us, please contact us at 0422 854 342 or email us at enqiuries@nextstepbroking.com.au
