Getting into your first home can seem like an uphill battle – or an impossible dream. But with the right advice and strategy, the road to owning your own home may be shorter than you anticipated.
While there are benefits to renting a home, for many of us, having ownership over the place we live offers greater peace of mind. And let’s face it, not having any say over how your home looks can get pretty frustrating, especially when it’s in need of repair.
Buying your first home is an achievable goal, but in order to get there, prospective buyers have some important things to consider, in particular cost, budget and location.
Renting = saving
If you rent, you’re saving money on some of the ongoing expenses of running a property, such as water, council rates, repairs plus other costs associated with buying a home – namely, stamp duty and monthly interest on your repayments.
So use these savings to start building your deposit. Putting aside the amount of money you’d otherwise be paying on these expenses each month can help you get into the habit of saving and will also kick-start your information-gathering as you investigate the costs and other financial implications of home ownership.
Finally, being able to show a lender that you’ve been making regular rental payments can be considered by lenders as evidence of your financial responsibility and ability to pay off a future home loan – so make sure you pay on time every month!
Who – or what – can help?
Australians are lucky that the government offers some assistance for the purchase of first homes through the First Home Owner Grant, which makes the hurdle of accumulating your deposit and managing your expenses just that little bit easier.
The rules for this grant differ around Australia, so it’s important to check your eligibility and grant criteria in your local state or territory before deducting a grant from your costs if you’re hoping it will help speed up the savings process.
Your mortgage broker and bank can give you information about the financial side of buying a home or investment property including how much you will need for a deposit; what your savings balance should look like and what you’re going to be repaying each month. It’s crucial to have a budget in place as this will help decide the location and type of property you can afford, which affects how quickly you can make it happen.
Getting a loan
Perhaps you’ve got a deposit saved, but you want to strengthen your loan application. Having a guarantor can be helpful in reducing the deposit needed and saving you money with costly Lender’s Mortgage Insurance, though being able to afford to pay off your mortgage in the long term is a requirement.
If going it alone within a reasonable time frame is unrealistic – for example if you haven’t saved enough for a deposit – one option is to purchase with a family member, partner or friend so that the financial responsibility doesn’t rest solely on you. The benefits of this can be long-lasting, as you will be sharing the cost of repaying your loan for its duration. It’s important to think about the financial viability of your loan partner so have a budget in place for both of you.
Your financial adviser or mortgage broker can help you set realistic expectations about what you will be able to afford when you take the buyer’s leap.
Thinking long-term can help you buy sooner
There’s no doubt that houses are expensive, so prices should be uppermost in your mind when switching from renting to owning. Take the time to canvas your options – on your current budget, what locations can you comfortably afford to buy a home in?
You may need to consider buying in a different area to find something that suits your needs right now. If it’s an investment property, perhaps location is a secondary consideration when compared to affordability.
Do your research – there are plenty of home-hunting apps and online resources to make the job of widening your search easier. And when looking at unfamiliar areas think about the other things that may not matter to you now but might in the future, like proximity to public transport and schools.
Getting everything right before buying your first home should take precedence over any impatience to stop renting. It’s a marathon, not a sprint, so think carefully about what you really want, and where you will most likely feel comfortable living (or investing) for at least a few years.
Speak to an Aussie Mortgage Broker today for help getting into your first home.
Have you recently gone from renting to buying? What helped you make the transition?