It is a long journey from saving up for your deposit to actually owning your own home, but it is certainly a rewarding one. Your first property is an important financial and emotional investment into your future, so you want to make the most of every opportunity to make your dream home a reality.
1. Start budgeting like you already own a home
The journey starts with saving for your deposit. This takes a great deal of discipline, especially in the beginning when the dream of owning a home seems so far away. Once you own your home, you may not have much disposable income, so start limiting your disposable income now. Put this money aside to build your deposit. Establish a realistic and practical budget, you will have a better idea of what you can afford.
2. Save the biggest deposit possible
The larger your deposit, the more equity you will have in your property right from the beginning. This also means you are paying less interest. Place your growing savings into a fixed term deposit or a high interest savings account so you can grow your deposit through accumulated interest.
A larger deposit will also have the bonus of making lenders look more favourably on your loan application. When they see that you are disciplined and committed to owning a home, they will know you are a good risk.
3. Minimize your debt
Accumulating debt through credit cards can undermine all your efforts to save up for a deposit. When you are ready to apply for a home loan, the lender will be examining your credit history, so if you do have ongoing debt, stay on schedule with payments so your credit rating is not adversely affected. Cut down on the credit card use, and pay off your car and any personal loans so you can concentrate on saving for your first deposit.
4. Remember to calculate the costs of purchase
Once you feel you have saved a sufficient deposit to buy the property you want, don’t forget to double check your figures to make sure you can also afford all the related purchasing costs like stamp duty which can be as much as 5% of the purchase price. Many first home buyers disregard or under-estimate expenses such as building inspection reports, stamp duty, and conveyancing costs. If you fail to account for these expenses, you run the risk of reducing your borrowing capacity when you are ready to buy.
5. Stay within your means
House hunting can be an extremely emotive business and it is easy to get carried away about a dream property and forget that you can’t actually afford it. You need to maintain strict self-discipline so you don’t become tempted to purchase a property that is priced beyond your means.
6. Apply for the First Home Owners Grant early
The First Home Owners Grant is a government initiative designed to assist Australians in purchasing their first home. This grant can save you thousands in fees and duties. The conditions and benefits vary from state to state so visit the First Home Owner Grant website to learn how this can help you.
7. Research incentives and concessions
Each Australian state and territory also offer their own incentives and grants to first home buyers, including stamp duty concessions. So it pays to do your research on what financial assistance you are eligible to receive where you live.
8. Choose a property that suits your needs
Stay objective when you are looking at houses, and write up a list covering all the essential requirements of your ideal property. The list will generally center on property size, location and price, although you may have other key requirements that need to be included on the list. You can also include a list of “wants” but these should be negotiable.
9. Don’t forget the property inspection
Once you have found your dream property, don’t assume that everything is as perfect as it seems on the surface. Arrange for an independent building inspection, so you know exactly what you are buying. Potential problems could include faulty plumbing, structural faults or electrical faults. After the inspection, you might find grounds to renegotiate the asking price, or you may decide the property needs too much maintenance to be suitable.
10. Get independent advice
Seek financial advice before you sign the contract. Many contracts of sale are subject to the purchaser obtaining finance, so knowing that you qualify in advance can make negotiations easier if you can prove to the vendor that you are in a strong position financially. In some cases your lender may be comfortable with your lending position that they give you pre-approval. This may put you in a position where you could purchase at Auction which opens up another segment of the market for you.
Always seek independent financial advice before committing to purchase a property or borrow money.
Contact us today if you need help or advice before purchasing your first home.