So, you’re thinking of dipping your toes in the property ocean? Great! Are you excited? We bet you are.
Buying property is likely the biggest financial decision many of us will ever make. It’s exciting and daunting. It could be the first step to some long-term financial security or a stumble, into a mire of debt that’s extremely hard to pull yourself out of.
It may be your dream to get that cute little Victorian cottage in the tree lined suburb; that modern apartment overlooking the waterfront or that 5 bed 3 bath suburban family castle close to the beach. We get it. However, there are some financial realities to consider.
Ready or not?
Being ready to buy property can come down to a lot of factors; job security, kids, relationships and future plans. But from a financial point of view, the easiest way to assess your readiness is your ability to save a deposit. Home loans aren’t quite as easy to come by as they were pre GFC and banks often want proof that you saved the deposit yourself. A loan from the parents may not be enough these days. This isn’t a bad thing, because while the banks use this as a test, so should you. Use the time saving a deposit as a test run for your ability to manage finances over a long stretch of time.
If you really can’t break that paying rent cycle, there are options to secure a loan with less than a 10-20% deposit but these will often cost you large amounts in interest payments and lenders mortgage insurance.
Whatever you have budgeted, you’ll probably need more.
‘So, you get your deposit, get your loan, buy your house and start paying it off, right?’. Well, yes….. kind off.
There’s a lot of extra costs that will suddenly jump out at you along the property buying journey. Be prepared that you may need to pay for mortgage application fees, stamp duty, lenders insurance, legal costs and building inspections. Then there’s the bonus costs of when you actually move in - council rates, home & contents and income insurance, utilities and any repairs, upgrades or damages to the property will come out of your own pocket.
Timing and Location
‘Things just aren’t what they used to be’ **best gruff old timer voice**. The term ‘safe as houses’ just doesn’t have the same ring to it. Property values tend to rise and fall like the wind and many have found themselves buying in a boom, only to see their house’s value go bust. We’re talking hundreds of thousands of dollars wiped out. Do your research on the local market conditions and don’t rush into things.
“I was excited, but now…”
“Fixed, variable, floating, principle, equity, loan structure, withdrawals, offset accounts, comparison rates, duty, re-mortgaging, market fluctuations…. Ahhhhh” Is your head in a bit of a spin? Loan types, how and when you will pay it all off and what all the jargon means can be a seriously daunting prospect. That’s why a financial advisor is a must for people looking to get into property.
At Visia Financial Services, we place your financial wellbeing in the centre of our operations. Let us worry about the financial nitty gritty that needs to be considered when you are ready to buy property. We got you 😉.
Kora Drage is an Authorised Representative of Financial Wisdom Limited ABN 70 006 646 108, AFSL 231138. The information contained in this article may contain general advice. It does not take into account your financial circumstances and objectives. You should consider talking to a financial adviser and read the relevant Product Disclosure Statement (PDS) before making a financial decision. Any views and opinions provided in this article may not reflect the views and opinions of Financial Wisdom Limited