Just like that first F-45 class, it pays to do a bit of a warm-up before diving into your first property purchase. Jump into the property playing field as soon as you can with these top tips.
We spoke to Mortgage Choice broker, Tim, to find out what first home buyers need to do to get organised and into the market ASAP.
Before you do anything else, your first step should be to chat to a broker and figure out a financial plan. This will let you know what you can realistically afford, and how you can go about saving for that goal.
“Speak with the broker first to understand your borrowing capacity, and set a savings plan and timeline,” encourages Tim. “If you want to save $10,000, work out how long that will take you. Anyone can make a plan, but if you don’t put a time limit on it, you’re not going to stick to a monthly commitment.”
Your “borrowing power” describes how much a bank will lend you for your home. While it mostly depends on how much you earn, there are other factors to consider.
“Let’s say you’ve got your salary, and that’s going to remain the same, the most important thing is to look at your outgoings. [That is] your living expenses and commitments, like car loans, personal loans and credit cards,” Tim says. “The more of those items you have, the less you can borrow.”
Tim strongly recommends first-time buyers investing in something affordable to get in the door of the property market.
‘Rentvesting’ refers to the situations when a home buyer chooses to rent in the area they want to live, but can’t afford to buy, and buys an investment property in a more affordable area and rents it out.
“If you can’t afford to buy in the area you live, or want to live, you probably need to look at rentvesting,” says Tim.
“Once you purchase that property, you are then renting that out to a tenant. So, you’re in the property market and you’re receiving rental income. That rental income will supplement a fair whack of the mortgage repayments, and then you’ve got the negative gearing benefits too.”
If you do want to live in your first property purchase, there are incentives you can take advantage of to make that happen sooner.
“You’ve got the first home owner grant (FHOG) and you’ve also got the stamp duty waiver or reduction (up to $600,000). If you construct a home on land, you also get $10,000 on top of that in Victoria,” explains Tim.
“If you’re a first home buyer, and not an investor, there are benefits to buying off the plan,” says Tim.
When you buy off the plan, you can only be required to pay a portion of your deposit, and then pay the rest upon completion of the build and settlement of the contract. This gives you some time to save, plus the property may have grown in value.
“It might be two or three years before that property is finished so during that period you’re essentially in the market. In three years’ time, if there’s any growth, you’re going to receive that growth.
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