Purchasing a home is like taking the next step in your relationship… you have to be sure you’re ready before you take the leap.
There are many reasons to say “I do” to a mortgage, from today’s low interest rates and skyrocketing rent, to the comforting warmth and convenience of having a set of keys and a place to call your own. But before you take your relationship with property to the next level, check these points off to figure out if you’re ready or not.
Are you in it for the long haul?
Buying your first home is an emotional process, not just a financial one. Just like finding that special someone and realising you’re ready to settle down with them, you have to know that you truly want a home before you can set about acquiring your first loan.
Ask yourself why you want a property. Do you really want to lay down roots somewhere and turn that house into a home? Or is it simply something you want to do on a whim?
Are you able to invest?
Generally speaking, the bigger the deposit the better. The more you can pay upfront, the less you’ll have to borrow and the lower your repayments will be.
While some lenders may lend up to 95%, as a first homebuyer you’ll be looked upon far more favourably by many more lenders if you’ve been able to save between 10 – 20% of the property value as a deposit.
If you have a reasonable amount saved as a deposit, then it’s going to help you buy a more expensive home. But that doesn’t necessarily mean you should use all your savings and borrow up to the maximum lenders will allow for your income.
Sometimes it can be a good idea to have a little in reserve after buying. If you have $60,000 saved, consider keeping $10,000 in your redraw or offset account. It will give you a buffer in case something changes your financial position i.e. starting a family, getting married or a career change.
Another option you might want to explore is getting help from your parents. If you have a decent income but you’re short on your deposit, a guarantor can help you apply for a larger loan than you might otherwise be able to. It can be worth asking parents about this early, and if they’re willing, they can join in with your first broker meeting and find out more about their responsibilities with this type of financial arrangement.
Are you aware of your ‘something borrowed’?
When you’re applying for a loan, a lender will take many factors into consideration before calculating how much you can borrow. This is often known as your ‘borrowing power’.
Improve your borrowing power by:-
• Consolidating your debt
• Lowering your credit card limit
• Keeping your financials up to date
• Saving a larger deposit
• Resolving any blemishes on your credit history
Please note – These above three signs should be considered when buying a ‘home’… Purchasing an investment property is more like dating… it’s not a lifelong commitment and you should instead consider:-
1. Investment real estate has to work for you, so you should only invest in properties that are in line with your goals
2. Investing in property is all about numbers so keep your emotions out of it
3. Buy below market value and make sure cash flow is good
As you can see there’s lots to consider before commiting to purchasing property, but here at Divitis we have a vast amount of experience in helping our clients untangle the complexity of buying property, finance, getting a loan and much more. Click here to contact us