Sav­ings, strat­egy key to buy­ing

First-home buy­ers should speak to in­dus­try pro­fes­sion­als and do as much re­search as pos­si­ble be­fore leap­ing into a pur­chase

Sold On Sunshine Coast - - Market Review - By CAS­SAN­DRA CHARLESWORTH

GET­TING on to the prop­erty lad­der may not be as af­ford­able as a gen­er­a­tion ago, but for those com­mit­ted to step­ping on to the first rung, it’s all about sav­ings and strat­egy.

This is the mes­sage from Mort­gage Choice CEO Su­san Mitchell (pic­tured right), who said the first step any prospec­tive buyer should take was to work out ex­actly how much they could bor­row.

“Buy­ing prop­erty is likely to be the most sig­nif­i­cant fi­nan­cial com­mit­ment most peo­ple will make,’’ she said.

“As such, first-time buy­ers should do as much re­search as pos­si­ble and speak to qual­i­fied pro­fes­sion­als be­fore jump­ing in with both feet.

“To start, first-time buy­ers should speak to their lo­cal mort­gage bro­ker in or­der to iden­tify their bor­row­ing power.

“Know­ing how much you can af­ford to bor­row will give you a guide to what type of prop­erty you can af­ford and where you can af­ford to buy.”

The de­posit

Re­gard­less of the type of prop­erty, all lenders re­quire a de­posit and ex­pect to see proof that a home buyer can save.

A stan­dard de­posit is 20 per cent of the prop­erty price, but in some cases that fig­ure could be less.

The key thing to re­mem­ber is the greater the de­posit you have, the less you need to bor­row.

“There are op­tions avail­able to those who do not have a 20 per cent de­posit, with lenders on the mar­ket of­fer­ing loans to those who have 10 per cent de­posit or less,” Ms Mitchell said.

“Those with smaller de­posits may have to pay lender’s mort­gage in­sur­ance which is a one-off fee that pro­tects the lender in the event the bor­rower de­faults on their loan.

“Al­ter­na­tively, first-home buy­ers may choose to ask a fam­ily mem­ber to go guar­an­tor on their loan. A guar­an­tor is a third party who can pro­vide ad­di­tional se­cu­rity to help a fam­ily mem­ber buy their own home.”

First-home buy­ers may also be el­i­gi­ble for a range of in­cen­tives in­clud­ing a first home buyer’s grant and/or stamp duty con­ces­sion, which go to­wards mak­ing a first home pur­chase more ac­ces­si­ble.

Ad­di­tional costs

Buy­ers should be aware it’s not just the de­posit they will need to cough up.

Ad­di­tional fees in­clude stamp duty, pest and build­ing in­spec­tions, in­sur­ance, con­veyanc­ing or so­lic­i­tor’s fees, and mov­ing ex­penses, all of which add up. So, be­tween the de­posit and ad­di­tional costs, how do you save such a sig­nif­i­cant sum?

A sav­ings strat­egy

Ac­cord­ing to Ms Mitchell, sav­ing for a first home does not mean for­go­ing all your favourite things but rather pri­ori­tis­ing what is im­por­tant.

“First-time buy­ers need to pre­pare a bud­get and start a dis­ci­plined sav­ings strat­egy which can demon­strate to lenders that they can ser­vice a loan,” she said.

“To start, cre­ate a bud­get that in­cludes all your in­com­ings and out­go­ings and a de­fine a sav­ings plan with re­al­is­tic goals.

“You should aim to re­view your bud­get reg­u­larly and stick to it. Mon­i­tor your dis­cre­tionary spend­ing and avoid reach­ing for your credit cards where pos­si­ble.”

Think out­side the box

Mean­while, the lo­ca­tion of the prop­erty af­fects af­ford­abil­ity, and first-time buy­ers may not be able to af­ford to buy in the sub­urb where they wish to live.

This has given rise to a trend called “rentvest­ing” where first-home buy­ers buy a prop­erty in a more af­ford­able sub­urb and then rent it out as an in­vest­ment.

“It could give first-time buy­ers the chance to get their foot in the prop­erty mar­ket with­out hav­ing to sac­ri­fice on their life­style,” Ms Mitchell said.

PHOTO: JACOBLUND

CAN BE DONE: First-time home buy­ers need a strat­egy.

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