There are costs associated with buying a property that requires discipline, vigilance, and careful planning. In this article we discuss common first buyer money-traps and how to avoid them.
Understand your budget
Your first home purchase requires a little introspection. Look at your finances, have a clear understanding of your personal budget, and understand exactly how much you can borrow. Plan for interest rate rises – they don’t stay where they are forever. Have a thorough understand of your average monthly budget (subtract your total monthly expenses from your total monthly income and the number that you have is roughly what you can afford to repay each month on a loan). Consider your career, family plans, future vehicle projections, and other costs (holidays, schooling etc.)
Understand the purchase cost
A purchase cost includes stamp duty, conveyancing, inspections, Lenders Mortgage Insurance (LMI) and other costs such as moving and early repairs. Consider these costs when evaluating your borrowing capacity.
The best way to avoid overextending is to have a firm grasp on your current incomings and outgoings. If you know exactly where all your money goes each month before you buy you will be better positioned to plan an affordable repayment strategy. When it comes time to make an offer, never go above your budgeted purchase price.
Take advantage of concessions
The First Home Owner Grant is a government initiative to assist people in buying their first home in Australia and can save you thousands in duties and fees. Visit the First Home Owner Grant website for details on each state’s grants.
Get property inspections
Building and pest inspections can also be used to negotiate on the purchase price. We’ve all heard horror stories of buyers discovering structural faults, water or pest damage after spending their whole budget on purchasing the home. The inspection is essential.
Know the true value of a property
While buying is an emotional experience, think outside the bathroom and consider local transport, schooling, council fees and performance, crime, and future value.
Part of the job of a broker is to ensure we don’t make mistakes. Give us a call for more information.