Whether you’re looking at purchasing your first home as somewhere to live or as an investment, it’s easy to make mistakes. Sometimes it’s asking the wrong questions, but sometimes it’s not knowing what you need to know. Making mistakes on your first property purchase can set your plans back years, so being informed and prepared is the best plan of attack. To help keep your investment timeline (not to mention your finances) on track, we’ve put together some tips for first-time buyers.
1. Know how much you have to spend
This might seem obvious, but you might need to think about more than just how much rent you’re paying right now. You can’t just plug your current household finances into a mortgage calculator and borrow the full amount — or rather you can, but you’ll be poorly equipped to handle any surprises that might pop up. Make sure you know not only what your mortgage repayments will be, but also what your rates and utility charges are, and how they’ll change once you buy. Also, make sure you factor in the possibility of future interest rate rises, as they can’t keep going down forever. Make sure your budget has some breathing room.
2. Aim for a 20% deposit
This isn’t going to be possible for everyone, but if you can, go into a property purchase with a 20% deposit. This is the magic number where you no longer have to buy lender’s mortgage insurance. This saves you thousands of dollars over the course of your loan (that you otherwise wouldn’t get back), and generally makes you a more attractive prospect for lenders.
3. Do all the boring bits
Don’t get so excited that you forget to do your homework! Impulsively buying a house lends itself to a whole slew of problems in the future, so make sure you do everything you need to do to protect yourself. Get valuers, conveyancers and building reports to make sure that the house you’re being sold is on the level (and not about to fall over).
4. Take advantage of everything available to you
As a first-time homeowner, it’s likely that there are a number of grants and schemes available to you to help absorb some of the cost of entering the property market. Some you might already know about, but it’s worth doing some searching and asking around to make sure you aren’t leaving money on the table.
5. Don’t buy into the hype
It’s the job of the real estate agent to get the highest price possible, so they’ll try to sell you every detail of the house as a feature. If they’re good at what they do, they’ll make you feel like the house is a steal at the price, and you need to get in quick before someone else snaps it up. Guard yourself against these tactics: don’t buy someone else’s dream at full price! If you don’t care about the glass feature in the kitchen (the one that was imported as a single piece from China and is one-of-a-kind), then don’t feel obligated to pay extra for the property for it. Keep what’s important to you at the front of your mind and hold onto that.
6. Negotiate, negotiate, negotiate!
Never forget that you are a person with money that other people want. Don’t let impostor syndrome force you to take a higher interest rate or property price just because you’re worried that’s all you deserve. Be willing to negotiate with lenders and sellers for the best deal for you. At the time you might think it’s only a few thousand dollars and it’s not worth the fuss, but how would you feel if you lost a thousand dollars cash? Money is money, whether it’s on paper or not. You worked hard for it, so don’t let it go if you don’t have to!
Buying a property is an expensive, time-consuming process, and it’s rare that it will be as quick or as easy as you might like. However, spending the time to do your homework and make sure that your financial affairs are in order, and that you really know property you’re buying, will save a lot of future tears. Just like a house, you need a good foundation if you want it to stand the test of time, so make sure your decision is rock-solid when the time comes to sign the paperwork.
