Top tips for home buyers
Buying a home is an incredibly exciting time! It can be the beginning of a new chapter in life…
…you have found your dream home in the perfect suburb and you are ready to embrace the home-owner lifestyle.
But with the recent downturn in the Australian housing market, and uncertainty around the coming election, you may feel a little nervous.
Amidst all the excitement, there can also be some apprehension about taking on such a large financial investment.
So we’ve put together some helpful tips that we believe will alleviate some of your pre-purchase worry.
Maximise your deposit
Saving for a deposit can seem somewhat daunting when you first start running the numbers. If you have done research into your desired suburbs, you should have an idea of house prices.
It’s best to start by determining the cost of the deposit, stamp duty, loan fees incurred in the mortgage set-up and the ongoing costs involved in the loan. Having a true figure in front of you is a great way to begin working towards your goal.
It is also worthwhile investigating your eligibility for government assistance.
The First Home Super Saver Scheme (FHSSS) was set up by the government to help people save their deposit.
Pre-tax voluntary contributions to your superannuation can be withdrawn, along with any earnings, when required. The low tax super environment provides a boost to your savings.
You might also qualify for the government’s First Home Owner Grant which can provide you with funds towards your deposit, concessions or discounts on stamp duty. The grant is different in every state, so it is important to determine what is available to you.
Another way to maximise your deposit is to invest while you are saving. If you know that you need a deposit of $50,000, you can start investing your funds when you have a smaller amount to help increase the money pool. Financial investments often provide a higher rate of return when compared to a term deposit or a simple savings account.
Understand your borrowing capacity
Today’s lending environment is quite different to that of the past. We have record low interest rates but since the banking royal commission, lenders have become far more scrupulous when reviewing a lendee’s application to make sure they can truly afford a home loan.
They will assess everything from your credit history, income, employment record and current debts through to living expenses, dependants and even how often you order Uber Eats.
They are required to thoroughly assess your ability to repay and must take into consideration any potential changes in your situation… including a possible interest rate rise.
While rates are currently at record lows, they are unlikely to stay low forever so it’s important that you take into consideration the impact of future interest rate increases.
Maintaining a financial safety net and not over extending yourself will help to minimise pressure on your household budget should rates rise.
If you fit the criteria, most banks will loan up to 80% of the property’s value. If you want to borrow more, you might be required to also take out Lenders Mortgage Insurance but bear in mind this can be a costly additional expense. It might be a better financial decision to wait and save more for your deposit rather than pay the premium.
It’s important not to take on too much debt, as this can have a negative impact on your health and wellbeing. You want to enjoy living in your own home, not spend your time anxious about how you will cover the mortgage repayments and other expenses. Be realistic now and you will be far happier in the long run.
Identify any hidden costs
Before you sign on the dotted line there are some extra expenses that you need to be prepared to pay. We’ve mentioned stamp duty and lending fees from your bank or mortgage broker as part of your initial calculations, but other costs you might encounter include:
- Conveyancer – to review sales contracts.
- Property inspections – such as pest checks or building defects.
- Property insurance – to protect your property from damage and contents from theft.
- Repair or renovation – ideally any minor repairs, upgrades or renovations would be completed before you move in to save disruption. For example, new carpets or fresh paint.
- Removalists, storage or rubbish removal – all costs involved in moving into your home.
- Utility services – some require transfer payments or other set-up charges.
- Council fees – waste services, car parking permit.
Budgeting for an array of extra costs can help you prepare for the future and make moving into your new home a truly enjoyable experience.