Buying your first Home

Saving up a 20% deposit especially for a home in a major Australian city is a BIG ask.  You need to put a plan in place and calculate how many months it will take to achieve your goal, your deposit for your first home.  Research where you want to live and what the average house prices are in that area, and how much a 20% deposit will be.

Why do I need a 20% deposit?

You need to save a 20% deposit to avoid paying mortgage insurance which can be thousands of dollars, paying out dead money in insurance which could go towards the purchase of your home.  It is worth waiting a little longer to get the 20% deposit together.

What can I afford to buy? Where should I buy?

Firstly consider the size of the loan you can truly afford.  The repayments should normally be about 25% to 30% of your take home wages.  Ask yourself, can I afford the repayments if kids come along in the next few years?  Do I need to factor in a drop in income and increased cost of having a baby?  Should I be considering a regional property rather than an inner city or metropolitan property?

Buying an Investment property to commence a home purchase

This is a common mistake young couples make in home purchase.  They purchase an investment property to commence with, the idea that it will go up substantially in value and give them equity in the property for a deposit on their own home.  Generally this strategy does not work it only uses up your savings and delays you getting into your own home.

Should I look at timing the market?

Remember you are probably going to live in this house for a substantial period of time.  If you can have your deposit, go ahead and buy.  Trying to time the market is difficult, the main thing is to be in the market before you get caught on rising market prices and have to save further monies for your 20% deposit.

Is it helpful to buy with friends or family ?

The problem with buying with friends for your first home purchase is at some stage they could want out of the shared arrangement and that could come at a bad time for you.  You could be forced to sell the home and be back to square one.  Shared house arrangements generally don’t last.  Buying with a family member can be a similar situation to buying with a friend unless the family member is more established and see it as an investment opportunity.

Do I ask my parents to go guarantor?

My advice to your parents is don’t do it.  Sure lend you the money or give you money towards a deposit but don’t put your parents into a situation of going guarantor.  It will probably mean the bank will want them to be part of the mortgage agreement.

Am I eligible for a government grant?

To find out the requirements, go to their website.

Arranging Finance

Seek out a reliable finance broker and shop around for your finance.  Consider carefully whether to fix the interest rate on your home loan.

Should I buy at auction?

You need to consider carefully before buying at auction.  It is easy to get carried away and pay too much for the property.

Should I buy off the plan?

I prefer not to buy property off the plan unless you know the reputation of the builder and have seen examples of their finished product.

FINALLY remember, buy what you can afford.  This first home does not have to be your dream home, it can be a stepping stone to your next acquisition.

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