So many emotions come along with the thought of buying your first home or even just a new home. It’s possibly one of the biggest decisions you will ever make. It can take a lot of thought, time, planning and budgeting. In saying that, it can be quite exciting.
Here are some tips and tools to help let go of some of the less desirable emotions.
Initial Checklist – Are you really ready to buy?
When deciding on how much you want to spend, consider how tight you want your cashflow to be each month. Sometimes it can be less stressful by staying comfortably within your limits, enabling you to cope with an increase in interest rates, and in the meantime being able to pay a little extra off on a regular basis should this suit your broader planning.
How much can you borrow?
To get started, run your numbers through the Borrowing Power Calculator. This can give you a rough idea of what size loan you’re capable of servicing.
If this is your first home, read about first home saver accounts and the First Home Owners Grant to determine if these will benefit you.
With this in mind, look at options and features of different loan products. You may benefit from meeting with a specialist to assist with this, such as a mortgage broker. Features to look out for are Home Loan Offsets, redraw facilities, and similar.
Should you be increasing your borrowings as part of buying a new home, it’s also important to review your insurances as the level of cover may have been set to cover debt repayment in the case of illness, injury or death. Sorry, a solemn thought but something to consider. On that note, it can pay to expect the unexpected, without permitting yourself to become all “doom and gloom” and never do anything.
Remember Stamp Duty is also an additional cost you need to consider, so make sure this is accounted for when doing your numbers and negotiating.
Meeting Mortgage Repayments
Just because the bank offers you a certain amount, it doesn’t mean you should take the offer without reassuring yourself that you will comfortably be able to afford the repayments.
Take into account other ongoing costs such as repairs, maintenance, council rates and home and contents insurance. Be aware that if you have a variable interest rate, then the amount you have to repay can change every month. If they were to increase you need to be sure that you will still be able to meet repayments.
The most important aspect of being able to service a loan is your income and job security. If you income fluctuates or if you anticipate there being changes to your cash flow in the foreseeable future then this make impact on your ability to service your new loan.
Once you know how much you will be borrowing, consider meeting with your financial adviser to discuss insurance. They will conduct a needs analysis to ensure you have appropriate insurance cover, which means you will still be able to service your loan in the event that you are sick, in an accident or unable to work. Personal insurance including Life, TPD (Total and Permanent Disability), Critical Illness/Trauma and Income Protection may be appropriate to give you peace of mind that you won’t be forced to sell your home if you can’t work.
Putting it all together
While many people attempt to buy their home on logic and fundamentals, most end up drawing on emotion in the decision making. This is evident when people find houses that tick all the boxes, but just don’t feel right.
Ideally, you will find a house that meets your financial and lifestyle criteria, as well as feels right, is likely to be a home you can enjoy for many years.
Moving forward, start by monitoring property prices in the areas you are interested in, attend auctions and open house inspections. When the time is right start bidding or make an offer!
Useful calculators for home buyers;
Budget Planner Calculator
Stamp Duty Calculator
Borrowing Power Calculator
Loan Repayment Calculator
Property Buying Cost Calculator
Review your insurances
Review or create a Will and Powers of Attorney