Buying your first home can be daunting – both financially and emotionally. It’s likely to be one of the biggest investments you’ll make, so the team at Wilson Real Estate have compiled their top 5 tips to guide you.
Start saving now
House deposits can take a while to save, so it’s smart to start saving as soon as you can. Save the biggest deposit that you can. This not only demonstrates to your lender that you can exercise enough discipline to accumulate a large amount of savings, but you will also have a buffer of equity in the property from the beginning.
Buy below your maximum price
Your bank may suggest you can borrow up to $400,000 in your initial meeting, but it’s much safer to search for a home that is well below your maximum price. Buy a property that you can afford now so that you don’t overstretch yourself. Many people count on a future job promotion to help keep them afloat – but what if that promotion doesn’t come?
Allow for extra costs
There are extra costs associated with buying property. Not only is there stamp duty, solicitor’s fees and inspection reports to consider, but if you choose to borrow over 80% of the property’s value you’ll be faced with lenders mortgage insurance (LMI). LMI isn’t actually for you – it’s for the lender, but you’re the one that has to pay it. These pesky extras can quickly add up and be a burden if you haven’t accounted for them. Don’t forget, interest rates are at historic lows, so be prudent and allow for at least a couple of percent increase over the next few years.
Choose between ‘wants’ and ‘needs’
It’s very easy to confuse your ‘wants’ with your ‘needs’, but it’s important to distinguish the two when buying. Do you really need that brand new four-bedroom house in an inner-city suburb or is it something you want? Take a good look at your salary, debt levels, costs of living and what the repayments would be like for your dream property. Can you afford it? If not, it’s time to prioritise what features are the most important in your new home. Your first home won’t be your last, so it’s ok to compromise!
Take advantage of government concessions
When you’re purchasing your first home, every dollar can help. If you live in Victoria, you can take advantage of the First Home Owner Grant, which offers $10,000 towards purchasing or building a new dwelling. Also, make sure you apply all the concessions on stamp duty. See this link: http://www.sro.vic.gov.au/first-home-owner