Moving out of home can be empowering but also daunting – especially if you’re buying your first home. So here’s your handy checklist of what you need to know to make it work.
Young people around the world are living at home with their parents longer, but whether you’re 18 or 28 (or perhaps even older), we all have to move out eventually.
As exciting as it is to be venturing out on your own and into the world of independence, moving out of the family home can come with challenges and hidden costs. That’s why our checklist is designed to help understand the potential costs involved so you can budget properly.
The cost of independence
An essential step in planning your move is having a clear picture of your current and future living expenses. And that means drawing up an honest budget. To get an accurate picture of your living expenses, check bank statements, bills and receipts that go back at least a few months. Also keep in mind those once a year expenses such as memberships, car registration or insurance. As a rule of thumb, if you’re in doubt on your living costs, it could be wise to overestimate expenses and underestimate income.
Once you know what it costs you to live in your current arrangements, you can calculate what the cost of living is going to be once you add rent or mortgage repayments, transport, utilities and other bills.
Before you pack your bags and bid your family farewell, you need to be sure your income can cover all your new bills with a little extra left over.
Don’t forget to factor in the one-off costs associated with moving, such as removalists or the cost of hiring a truck, connection fees for internet, gas and electricity, as well as new furniture and appliances. If you’re renting, you might have to pay two weeks’ rent in advance and a bond as a security deposit.
Buying a home: how to save
Saving for a deposit on a home can be disheartening. While the task of saving $100,000 can be daunting, approaching it in small chunks of $100 a week may be more achievable.
Making a savings plan usually comes down to priorities and trade-offs. Only you can decide what you can or can’t do without, but most of us can’t expect to save without making some little sacrifices along the way. When you’ve calculated what you would like to save each month, you may need to see what you can cut or review to help achieve your savings goal – it may be your mobile phone plan, entertainment, unused gym memberships or smaller expenses that can add up such as buying your lunch every day.
Things you may not be aware of
Once you’ve saved your deposit, you’ll have to also think about the additional costs associated with buying a house. These include legal fees, stamp duty, pest and building inspections, loan application fees, Lender’s Mortgage Insurance (which you have to pay if your deposit is less than 20% of the home’s value) and council and water rates among others.
For a detailed list of the extra costs you may incur when buying property, take a look here.
When to ask for help
Competitive property prices in Australia’s metro areas mean saving a deposit can take a lot longer than it used to. To speed things up you may wish to consider asking for help from your parents, if they are able to provide it.
Acting as guarantors means parents use their own property as additional security on their children’s home loan, which can help you avoid paying Lender’s Mortgage Insurance. Alternatively, if your parents contribute to part or all of your deposit, lenders may require a signed declaration that the payment was a one-off gift and not a loan. The purpose of the declaration is to assure the lender that the home loan applicant isn’t taking on additional debt as well as a mortgage.
Maintain a clean credit history
When you’re not used to paying monthly or quarterly bills, it can be easy for one or two to slip through the cracks. It’s important to be vigilant when it comes to protecting your credit history. If you’re not paying bills on time, you could come up on a credit rating search as having a poor credit history. Apart from affecting your ability to get credit if you want a new phone or sofa, a bad credit history could mean your future home loan application is rejected, or you could end up paying a higher interest rate.
Moving out checklist
◊ Buying a home expenses: in addition to saving for a deposit, set money aside for legal costs, stamp duty, pest and building inspections, loan application fees, Lender’s Mortgage Insurance, council and water rates, and strata fees (if you are buying an apartment).
◊ Moving costs: book and pay for removalists or truck hire.
◊ Renting costs: allocate money for two week’s rent in advance and rental bond.
◊ Utilities: Set up electricity, gas, phone, internet and pay TV connection. Set money aside for connection fees.
◊ Debt and bills: pay off any existing bills and debt before moving. Cancel any memberships that you’ll no longer be using.
◊ Furniture and appliances: factor in the cost of new or second-hand furniture once you’ve accounted for what you’ll be taking from your family home.
◊ Insurance: do you need to organise medical or home and contents insurance? If you have a car, notify your insurance company of your change of address (your premium may go up or down as a result).
◊ Sell unwanted items: your parents will be thankful for a decluttered space and you can gain some extra cash to cover your moving costs.
Download the checklist today or for more information on how to get started book an appointment with your local Aussie Broker.