According to a number of high profile property commentators, now is a better time than ever for first homebuyers to make the leap onto the property ladder.
Interest rates are at all time historic lows and look like they’ll remain that way for some time. Lenders are pitching favourable incentives to first time housing finance customers in a bid to appease regulators.
And then there’s the recent market cool down, with slowing competition and capital gains making the affordability barrier a little more surmountable…even though you’ll still need a pole vault to make it over the top in many parts of Melbourne and Sydney.
But an opportunity is an opportunity, and if you think you might have the means to scramble onto that initial rung, then there’s no time like the present to the leap into home ownership. Here are 8 tips to give you a leg up…
- Work out (and within) your financial comfort zone.
This is really a no brainer. Learning how to budget will take you a long way in life. If you’ve never seriously sat down and been accountable (literally) for how you manage your money, then this is the best time to start a new habit!
The worse thing you can do when buying your first home is over-extending yourself and ending up in a financial black hole. Even though interest rates are currently enticingly low, at some point they’ll start to rise once more…an eventuality you need to prepare for.
- Budget real good!
(Please don’t write in about my grammar…just a sprinkle of Salt ‘n’ Pepa to brighten your day.) The thing many people fail to do when preparing a budget is thinking in the here and now, as well as down the track.
Of course you have to account for present circumstances, but what happens when they change? What about when you start a family and perhaps only have one income for a period of time?
I know you’re looking for a home. But given how expensive property is these days, it’s somewhat foolhardy not to consider the long-term economic implications. Plus, if you get this first purchase right in terms of asset selection and loan structure, you can set yourself up for a very bright financial future indeed.
- Know where you stand
Once you know how much you can afford and how much you can safely borrow, it’s time to start the ball rolling with finance pre-approval. One of the worse things you can do is spend months searching for that perfect property without first being aware of exactly what the banks are prepared to contribute to your cause.
Imagine finding your dream home, only to discover your money won’t stretch quite as far as you initially thought and missing out! Or missing out come auction day because you’re not financially ready.
Finance pre-approval is relatively simple to obtain and although it’s not an ironclad loan contract, it will give you more confidence as you hunt down that prized first home.
- Be realistic!
Expectation leads straight to disappointment for many first homebuyers and for some, it leads to commitments made in haste that can cause a lifetime of financial ruin.
Remember this is your first home. It’s the leaping off point for your life. It doesn’t have to meet all of your needs now and forever. But it does need to be affordable and allow you to enjoy the trappings of youth, rather than being trapped in a stress-inducing mortgage.
Whatever you do, don’t overspend on your allocated budget without first consulting an objective third party like your parents. Someone you trust who can keep you in line and rein in those emotional impulses.
This is all about learning the art of compromise and patience, rather than giving in to immediate gratification as modern day consumers.
- Look for the goose that lays the golden egg
A great way for first homebuyers to really make headway in the property markets is to seek out a fixer upper.
Something most people would avoid because they see work, whereas you see potential…the potential to create your own home the way you want it and manufacture additional equity all at once.
Older properties waiting to be hauled into the twenty first century are generally more affordable than dwellings where the previous owners have done all the hard work.
If you have your heart set on uncovering a renovator’s delight it’s essential to consider the amount of work required, along with the associated time and expense involved. Then there’s the question of whether you’ll want to live on site during this process.
- Really inspect the property!
Sometimes I’m amazed at how quickly people make property-buying decisions. This is arguably one of the most significant financial commitments you’ll make in your lifetime, but most of us spend more time test-driving a new car than we do a new home.
Try to do a few inspections at various times of the day to get a feel for how the residence works with regard to things like aspect (natural light, etc.) and ambience (noise from passing traffic, etc.).
Speak with neighbours where possible to get an idea of the community you’re moving into and finally, engage the necessary experts to conduct building and pest inspections so you know exactly what you’re investing in.
- Be prepared to play hardball…and lose
Negotiation is an essential part of the property buying process. And of course most successful real estate agents have perfected the parlay.
If you don’t feel you can tackle the negotiation process alone, I’d highly recommend consulting an industry professional, like a buyer’s agent, for a few tips and tricks of the trade.
Importantly, you must know when to walk away and cut your losses. There will always be another opportunity.
- Talk to the experts
Finally, in order to get a true appreciation for how different property markets tick and how you can break into housing without placing your future self in a precarious financial position, I’d recommend consulting a number of appropriately qualified industry professionals.
Real estate services are everywhere you turn these days. The important thing to remember here is qualifying the person you speak with to ensure they’re not just trying to sell you something out of a purely self-motivated agenda.
Here at Trilogy Funding we have nothing to sell you…but we do have a wealth of information on optimal finance and buying structures when it comes to property. It’s what we do every day!
Click here now to connect and get a much-needed foot up the property ladder today.
About the Author
Since 2008, David Thomas has built a business aimed at servicing the needs of property investors, owner occupiers and small business owners. David is recognised as one of the top 10 independent mortgage brokerages in the country, David and his team have settled almost billions of dollars worth of residential and investment loans over the last decade.
Known for his straightforward, relatable style, David believes by educating people about property funding; they fare better in the market. By sharing his expertise openly, some of the people he educates will likely become his clients. It's a win-win approach.
David Thomas is a credit representative (Representative Number 506153) of BLSSA Pty Ltd, ACN 117 651 760 (Australian Credit Licence 391237).