Over the years, investing in real estate has been incredibly successful for millions of Australians. However, for new borrowers, there are a number of factors that should be taken into account before getting started.
Here are five key considerations for first home buyers before taking out a mortgage.
1. Find an affordable property – not a cheap loan
With interest rates starting to rise, it’s more important than ever to ensure you can afford the financial commitment of paying off a home loan. While you should always look to compare interest rates on different loan products, it’s more important to set your sights on buying a property that is affordable based on your own financial circumstances. You might not be able to afford your dream home right away, but your first investment can be a stepping stone to bigger things.
2. Learn to budget and save
Before you even start looking for a property, you need to make sure you’ve got your budgeting on track and you’re saving for a deposit. There’s no point buying a home if you quickly find out that the cost of owning the property is more than you can manage. By putting sound financial management in place before buying a home you can be confident in handling the repayments.
3. You don’t need a 20% deposit
Contrary to what you might have heard, you actually don’t need to have saved up a 20% deposit to purchase a property. There are a number of ways you can buy a home with far less than 20%, especially if you’re a first home buyer. There are Government schemes and guarantor loans that can assist you. Alternatively, you could look at paying Lenders Mortgage Insurance (LMI) if you aren’t a first home buyer.
4. Look at the loan features
While most people are focused on the interest rate they’ll be paying on their home loan, it’s equally important to consider all the other features on offer as well. These different features can potentially save you a significant sum of money. Things such as fixed vs variable rates have been very important recently, while an offset account normally has a big benefit to a mortgage holder.
5. Look at the total upfront cost of purchasing
A lot of attention for first home buyers is often dedicated to getting the right features in their homes and buying in the location that they want. However, it’s just as important to look at all the upfront costs. While most homeowners would know about the impact of stamp duty, –first home buyers are typically exempt. It’s the other costs that can easily mount up. These include things like inspection fees, transfer costs, conveyancing, application fees and insurance, plus additional expenses like rates, water and any strata costs.
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