Welcome to Part 3 of our First Home Buyers series.
Buying your first home should be a memorable occasion for all the RIGHT reasons. This article gives some examples of the kinds of mistakes to avoid so that your dream doesn't turn into a nightmare.
1. Rushing to buy
In our eagerness to get our own home it’s easy to overlook the fundamental research that we should be undertaking first. This is often the case for first home buyers. Remember, this is one of the biggest purchases you’ll make so it deserves to be properly considered.
Things to consider include:
- a) Proximity to work and other lifestyle considerations
b) Type of housing you are best suited to at this stage in your life (and how your circumstances might change in the near future) such as:
- House and Land – remember the weekly lawn mowing and gardening along with normal maintenance
- Apartment – minimises your commitment to regular outdoor maintenance and maximises your ‘free’ time
- Townhouse – smaller outdoor areas to look after but does allow for some garden space
2. Underestimating Costs
It is important to be aware of all the costs associated with purchasing a property. One thing sure to take the gloss off the great moment is having to ‘beg, borrow or steal’ extra cash in the last days before you are due to move. Known costs you should allow for include:
- Your deposit amount
- Stamp duty
- Government transfer duty
- Registration of the mortgage
- Mortgage insurance (if borrowing more than 80%)
Our FREE iPhone and Android App enables you to calculate most of these costs. Get it here:
The good news here is that most states offer significant stamp duty concessions for first home buyers and, if you are buying a new property you may qualify for a First Home Buyers Grant of up to $20,000.
In addition to these you should also be allowing for other costs that will occur when your purchase settles or shortly after.
- Utilities and phone connections
- Water and rates adjustments (the amount the seller has pre-paid on council and water rates is paid back to them from your funds at settlement)
- Body Corporate fees and adjustments as above (if you are buying a strata titled property)
- Home and contents insurance
Also, consider any additional debt you might take on – i.e. for a new car or furniture – and how this factors into your other financial commitments.
3. Letting your heart rule your head
Try not to get carried away with the excitement. Even though this is to be your home try to treat the transaction like you would an investment. Try to think dispassionately about the pros and cons of the property and your financial circumstances. Take off the ‘rose coloured glasses’ and look at what the property and mortgage payments will mean to you in terms of your ongoing financial circumstances.
4. Overstretching yourself
Prepare a budget and make sure you are comfortable with the mortgage payments BEFORE you commit to buy. Also, factor in an allowance for what happens to your payments if rates go up over time. If this is an issue you might consider taking a fixed rate product to remove this risk for three or five years.
Remember to allow for entertainment and fun. You don’t want to be a slave to the property.
Also, consider speaking to an expert about income and mortgage protection insurance.
5. Changing circumstances
This more commonly relates to that stage of the process between gaining your pre-approval and finally settling on your purchase.
It is usually critical during this stage that your circumstances don’t change too much. Things like tenure in your job, other financial commitments and savings history to name a few all impact on your final loan approval. If you change jobs during this period or take on additional debt you could jeopardise the final mortgage approval when you find your property.
This is not to say don’t take that job offer – more that you may need to consider what the priority is at that particular time. Your mortgage broker can help advise on this if such a circumstance arises.
While there may be other 'mistakes' that can make the journey to home ownership a bumpy one the main message is to make sure that you have done your research and that you seek good mortgage advice early in the process. Why not register to receive the full series of blogs or, in you are getting close to beginning the process give us a call to arrange an obligation free consultation.
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