Can you afford to buy?
How to buy your first home in a booming property market.
Entering the housing market can seem quite overwhelming for first-time home buyers. When prices are at record highs, and economists are predicting it will only get higher in the years to come, is it possible to move out of home or leave renting behind? While we picture first home buyers as 20-somethings, Australian Bureau of Statistics research revealed 45 percent of first home buyers are older than 35*. No matter your age, entering the property market can be daunting so here are my top tips.
- Speak with a lender as soon as you can to get a realistic view on what you can afford to borrow and what you need for a deposit. By having a plan in place, you’re more likely to work towards and achieve your goal of property ownership. Online loan and repayment calculators can be confusing so speak to a professional who can provide an unbiased opinion and start planning now.
- Most parents want to help their children to get ahead and the reduced costs associated with living at home can help you to save your deposit faster. If this isn’t an option for you, consider renting with a group of people to reduce your costs. Remember, this is short-term only and sharing expenses can help you to save more and get ahead faster.
- Think about the type and location of the property you’re looking to purchase. Quite often your first home isn’t your forever home so be realistic with what and where you can afford rather than what your dream home is. Buying something that suits your current situation and budget, not what you might need in the future, will assist you in getting into the market. This will help to build your equity and start the journey towards your dream home.
- Depending on property price, paying lenders mortgage insurance (LMI) may work in your favour. Compare the price you’re likely to pay on LMI with the rent you would need to pay over the time it takes to reach a 20 percent deposit. You may find that it will be cheaper to pay LMI and get into your first property faster.
- Whatever you do, don’t borrow above your means. Even though interest rates are at record lows, they will start to rise. Think about whether you’ll be able to afford higher repayments when interest rates increase. It may mean you need to buy a fixer-upper or a smaller property to get into the housing market, but it’s better than losing your home if you’re unable to make your mortgage payments.
Whether you’re looking to buy soon or a few years down the track, taking some time to consider the options and resources available to you can go a long way to help reach your home ownership goal sooner.
*Source: Australian Bureau of Statistics (2019) Housing Occupancy and Costs.
The information in this article has been prepared for general information purposes only and is not intended as legal advice or specific advice to any particular person. Any advice contained in the document is general advice, not intended as legal advice and does not take into account any person’s particular investment objectives, financial situation or needs. Before acting on anything based on this advice you should consider its appropriateness to you, having regard to your objectives, financial situations and needs.