1. Do not underestimate the costs involved with purchasing your first home.
A plus B doesn’t equal C when it comes to the finances of buying your first home. It is easy to make the mistake of thinking that if you have a $30,000 deposit and qualify for a $300,000 home loan you will be able to afford a $330,000 property. This simply isn’t true. There are many costs involved with buying a home and these should all be researched according to the state you live in. A qualified broker can help you work out the potential costs involved and find a loan amount that takes your current financial situation into consideration. The joy of buying your first home can quickly become a nightmare when you discover you don’t have the finances to cover the costs involved such as inspection reports, Lenders Mortgage Insurance (LMI), solicitors’ costs, and stamp duty to name a few. Many broker’s and banks have online calculators that can give you an estimate of some of the costs involved such as Stamp Duty and any government grants available.
2. Create a realistic budget and stick to it.
We all want the best we can get. But stretching yourself to purchase a property that is the very best you can afford and therefore the most you can afford can leave you at risk of not having enough finances aside when unexpected circumstances crop up. A sure fire way to turn buying your first home into a nightmare is to over extend yourself. You need to have a realistic budget that leaves wiggle room to manage unexpected costs. If you know exactly what your outgoings are every month you will be better positioned to know what you can reasonable outlay every month on your repayments. It is too easy to get swept away with your excitement and push to spend that extra $10,000 – $50,000 on a bigger and better property but at the end of every month you need to know you can come up with the extra *$50 – $240 on your monthly repayments. Buying your first home shouldn’t turn into your worst nightmare. The priority should be your ability to make your monthly repayments without causing you and your family undue stress. Another bedroom, bigger yard or more garage space isn’t worth spending every day wondering if you are going to be able to make your full repayment this month. Remember, this is your first home and is your opportunity to make a sound financial decisions that could potentially set you on the path to financial freedom.
*Repayment amounts are an estimate only, based on a $310,000 loan at 4% interest over 30 years compared to a $300,000 loan and based on a $350,000 loan at 4% interest over 30 years compared to a $300,000 loan. We advise that you consult a professional regarding specific monthly repayments for your financial circumstances.
3. Invest in yourself by managing risk
A building inspection can seem like a ‘waste’ of money and it is common to think ‘what if I am not happy with the report and I just spent money on a house I am not going to purchase’? Consider thinking of it another way. ‘I just spent more money than I have ever spent in my life on buying my families first home and within 12 months we lose the home’. This is potentially what can happen should any major faults not be identified before you purchase the home. Do you have spare capital to rectify any major problems? Do you have the ability to borrow more money? Are you willing to put your family and your finances at risk in order to save now? Managing risk is the first step in ensuring you are on your way to financial freedom and where better to start taking control of your finances than with the purchase of your first home.