Securing your first home can sometimes feel like a distant possibility. Aussie asked the experts for advice on staying motivated while you save your deposit and what you can do to be ready to make your move.
Despite today’s current housing market inflation — impacting median prices in several major states, especially NSW and VIC — there are still opportunities for first-time buyers to get their foot into the property market.
As you save for your deposit, keeping your plans and your motivation on track can be challenging. But the opportunity to buy in today’s market can also be empowering, if you go about it the right way.
Here are a few tips and tricks that can help you to be ‘property ready’ and how to strike when the time is right to score a property that will suit both your capabilities and aspirations.
Know your limit
Before you dive into the wonderful world of property ownership, it is important to work out what you can actually afford. This will include considering how you’ll save for the deposit and how you’ll be able to maintain your financial obligations.
According to ASIC the best way to calculate what you can afford is by appropriating a simple formula:
Amount you can afford to borrow + deposit saved – fees & charges (which may include stamp duty, legal fees, loan establishment fees and lender’s mortgage insurance) = amount you can spend on a property.
The amount you can afford to borrow can also be calculated by your local Aussie Broker, and will be dependent on your earning potential, existing loans and financial obligations.
You can also calculate your potential borrowing power and estimated repayments using Aussie’s online calculators.
Save for your deposit
With your lending potential calculated, it’s time to start thinking about saving for your deposit.
So where do you start? The Commonwealth Bank suggests analysing your current spending habits, which starts with actually writing down as much information as you can on everything that’s going in and out of your accounts.
You may need to ask yourself some tough questions. Do you have a habit of sipping on one or two deluxe lattes a day? Do you eat takeaway for lunch, instead of bringing food from home? Have you really been using that gym membership you fork out for each month?
Setting a budget may help you cut back on unnecessary spending habits. Of course, some changes can make a bigger difference than others. Scaling back your daily coffees can be great start, but moving in with family for a short while (if you can) could make a bigger difference to your savings.
It’s important to be realistic about what you are, or aren’t, prepared to sacrifice as you get your savings plans on track.
If you have other debts, consider how you may be able to consolidate them and find measures to pay them off without escalating the interest. When you’ve looked at all your current debts and spending and where you could potentially cut back, you’ll be in a better position to really start saving and prepared to work hard at your plans. Keep in mind that you’ll want to save at least 20% of the purchase price of the property you’re interested in as your deposit.
Get to know the market
Once you’ve worked out what price bracket is affordable for you, it’s time to start thinking about what kind of property you are after and where you can afford to buy.
Telly Poulos, a licensed Real Estate Agent from Richardson & Wrench Parramatta, NSW, says that one of the best ways to do this is to spend at least 15 minutes a day scouring through real estate sites such as realestate.com.au and domain.com.au.
“You can search by price, area, and you can also keep your eye on what price houses went for in the area,” he says. “Given that you want your home to be an investment, you also need to calculate whether there is potential for you to capitalise later on in life.”
While he doesn’t recommend reserving every weekend for frequenting auctions and open houses, Mr Poulos still believes it is beneficial to attend a few.
“It gives you scope on how these exchanges work, how to get your foot in the door with a seller, and what questions to ask when you’re looking for the property of your dreams,” he says.
Mr Poulos also suggests it wouldn’t hurt to look at properties that might be a tad out of your budget.
“This gives you a comparison on what your dollar can buy,” Mr Poulos says. “Besides, you might find a house you like and, because you’ve been proactive about the purchase and have the collateral up front, the seller might favour your offer.”
Keep a level head
If you’ve been a disciplined saver and taken the time to understand the market you’re hoping to buy into, the time will come when you’re ready to make your move. A time when all your hard work and sacrifice will seem worthwhile.
As the opportunity draws closer, it’s important to keep your wits about you. Above all else, don’t panic or feel pressured into buying because the market is inflated, or get caught up in the thrill of signing on the dotted line.
“This is when you’re in danger of over-exceeding your means or impulse buying,” Mr Poulos says. “Remember, at least two in three potential home owners are browsing just like you so there’s no need to panic.”
You may miss out on something you’ve got your eye on, but another opportunity may be just around the corner. You’ve worked hard to get to this point, so waiting a little while longer isn’t the end of the world.
Many home buyers say they “just knew” when they’d found the property that was meant for them. When you find yours, Mr Poulos suggests that showing some enthusiasm to the agent handling the sale could work in your favour.
“A real estate agent is likely to invest more in you if he feels you are serious about a purchase,” he says. “It doesn’t mean you have to commit, but they will certainly put in the yards for you when it comes to the decision-making process.”
With a little discipline and a lot of patience, you can make the ‘impossible’ possible. And it’s always a good idea to have someone by your side who can help you navigate the way. Contact your local Aussie Broker who can help you plan for success in your home ownership ambitions.
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Tips for first home buyers to help with deposits or repayments