Buying your first home
Saving for your first home can be a daunting prospect. With the price of property seemingly always on the rise, having the right approach to savings ensures that, over time, you will still be in a position to build a sizeable nest egg that will allow you to enter the property market.
Owning your own home provides you with the opportunity to put down roots, providing sense of security and giving you the opportunity to add value through your efforts in renovation, reaping the rewards that can result . . . .
Where to Start
A savings history will help with your first application. Gone are the days when you could rock up to the bank and borrow 100%. Ideally you should try to save at least 10% per cent for a deposit, or at a minimum 5% plus an amount to cover acquisition expenses.
Some form of the first home owner’s grant is available in most states of Australia and this can help off-set some of the expenses associated with your first property purchase, and depending on where you live and intend to buy, you may be able to access other benefits. As the benefits are different in each state and subject to change, buyers should make further enquiries with their local adviser.
Here are a few tips to get you started:
1. Start with an understanding of where your money is going. Draw up a budget and spend at least 6 months tracking where you spend your money.
2. Put in place a strategy to pay down your credit card debt as soon as practically possible.
3. Start your savings plan today, look at your discretionary spending and make a habit of regularly paying a fixed amount of your salary into a separate high-interest savings account.
4. Before you take the plunge, do some homework and get yourself some professional financial and legal advice.
Some considerations need to be given into a wide list of things that can impact the overall outcomes. Some suggestions include:
1. Find a good conveyancer or solicitor
One with plenty of experience in property matters. At the very least ensure you are dealing with a solicitor of your choice and one that is very much “at arms length” to the vendor of the property you wish to purchase. • A recommendation from a friend is invaluable.
2. Know your finances
Ensure that your finances are in order and that you have a clear understanding of what you can afford to borrow; seek the services of a financial planner or other respected individual when assessing the money side of the equation.
3. Shop around
Consider all the finance options. Items such as money available towards the deposit, fixed vs variable split, low interest honeymoon periods will all have an impact on the end result and your ability to sleep at night. A finance broker such as Quay Finance can help you assess offers from multiple lenders and establish what works best for you.
4. Get pre-approval
You should have pre-approval before actively searching for a property. And especially prior to bidding at auction or entering into a private treaty sale. A pre-approval will give you peace of mind, knowing what you can afford. Pre-approval generally lasts about three months.
5. Do your market research
Know the area you want to live in and the market itself by regularly attending auctions and home inspections. Be prepared.
6. Follow your “gut” (and not your heart)
Avoid emotional decision making, it can result in you paying more or buying something that doesn’t meet your more practical needs. Make sure you stick with your original plans – these were likely put together in a period of clarity and with the emotional elements ‘turned down’.
7. Be prepared!
If you decide to buy a home under auction you will need to do all your investigations (building / pest reports etc) prior to making an offer or bidding on the home. If it’s a unit or townhouse a strata report is also important. Make sure you have your solicitor review the contract, that’s what they’re paid for.
8. Know your limit and have the strength to walk away
Don’t be afraid to walk away if your offers are rejected, remember you are working within a budget.
Lastly, buying your first home is only the start of the journey. Other useful tips to consider are:
- Make extra repayments when you can.
- Make your payments on time to keep your credit history clean.
- Be prepared for interest rate fluctuations.
- Don’t be afraid to ask about fees and charges.
- Beware of hidden costs like legal expenses and stamp duty.
- Be aware of your other spending and ensure you stick to a budget.