There can almost be nothing more exciting than purchasing your first property; but along with the adrenalin can also come some trepidation – it is a huge financial commitment, the biggest most people make in a lifetime.
Below we have outlined some useful tips to prepare yourself and as a consequence make the process less stressful and daunting, and much smoother.
- Pre-Approval: Once you’ve made the decision to enter the market, it is strongly recommended that you obtain pre-approval from a lender first; this not only gives you a realistic price parameter when searching, but also means when you do find the property you want (and can afford), you are in a position to put in an offer immediately to avoid missing out.
- Debt Reduction: Prior to taking the plunge into a mortgage it is a very wise idea to try and settle any existing debt you have, Eg. credit cards, hire purchase, personal loans. This will not only make you a more viable candidate for a loan, but also assist you to manage your cost of living when paying off the mortgage; in fact, the extra you were paying on other debts could be put into your home loan to build equity if you can afford to spare it.
- Be Realistic: Do your budget and allow for unforeseen circumstances; just because the bank is willing you lend you an amount of $xyz doesn’t mean you have to buy a house at that figure – you can go below, even if it means lowering your expectations, it will loosen those screws when unexpected expenses pop up. As a rule of thumb, try and keep your mortgage repayments at a maximum of 25% of your income.
- Take Your Time: Once you’ve got your finance pre-approved and reduced existing debt to a minimum or zero, you may find when you initially start looking you don’t find anything that really suits straight away. Don’t rush into purchasing, trust your instincts, take your time – if you are lucky enough to find something that suits really well quickly; then great, if not, keep looking, and be patient.
- Keep Your Emotions in Check: Think not just with your ‘heart’, but importantly with your ‘head’. Minor problems can be overcome, what is important is the big picture – this might not be your ‘forever’ home now, but does it have the potential to gain value? Is it in a convenient location? Is it a quality neighbourhood? What future infrastructure projects are planned for this area?
- Hidden/Extra Costs: When planning to buy your first home there is a huge focus on the mortgage repayments, and budgeting around this; but there are other additional expenses to consider also, and some of them are ongoing fees, such as rates and insurance.
- Insurances: building & contents (your lender will generally require you to have building insurance in order to move forward with the mortgage).
- Legal fees – conveyancing hire when purchasing.
- Stamp Duty – a percentage of the price of the house (varies from state to state), there can be incentives/reductions for first home buyers.
- Bank fees – depending on your lender, these may be applicable.
- Body corporate fees – if purchasing into a multi-dwelling community, such as townhouses or apartments, or gated residential enclave.
- Moving fees – cost of professional movers or van hire etc.
- Council Rates – these are generally charged bi-annually, some local government regions charge annually.