Kassia Byrnes* says there are some crucial questions you need to ask yourself if you’re thinking about getting into the property market.
Feeling ready to delve into the world of property ownership?
Good for you.
It truly is an exciting step but also a big one, so you want to make sure you’ve asked yourself the right questions before you jump in.
Besides, preparedness never hurt anyone.
Taking time to examine your circumstances and motivations will increase your success rate when it comes to purchasing a property.
Here are a few things to look at before you buy.
- What do I really want from my purchase?
Work out what you really want from your property purchase.
Maybe an apartment would actually be perfect for you.
Have you considered what area you would like to live in?
Would you be willing to change location if the price (and property size) is right?
Have a clear picture in your head before you start looking.
Interestingly, a 2018 survey by Mortgage Choice found that although an apartment is a cheaper alternative to buying a house, 62 per cent of Australians still feel that apartments don’t have the same ‘homely’ feel as a house and therefore don’t fit the ‘Australian Dream’.
It’s important to remember that’s purely perception and this needn’t have a place in your property purchase assessment.
This is about what you’re after, not about how other people feel.
- What help is available to me?
According to the same survey by Mortgage Choice, nine out of 10 prospective homebuyers feel that the property market is a hard one to get into.
It’s important to know what help is available to you.
If this is your first foray into the property market, you’ll be pleased to note the Federal Government launched an initiative to help first-home buyers like you.
The 2020 First Home Loan Deposit Scheme lets 10,000 approved applicants take out a mortgage with only a 5 per cent deposit and allows them to avoid paying lenders mortgage insurance.
For context, the usual mortgage deposit is at least 20 per cent of a property’s purchase price.
To qualify, you must individually earn up to $125,000 a year or be part of a couple that earns a combined total of up to $200,000 a year.
Another governmental scheme to help first home buyers is the ongoing First Home Owner Grant.
It provides a lump sum of money towards a first home or vacant land to build a home on, which isn’t taxed and doesn’t have to be repaid.
Again, there are conditions to qualify – such as being a permanent resident or an Australian citizen and having to live in the home for at least six months after purchasing it.
Also, keep in mind there are people you can talk to for help navigating everything that comes along with buying property, such as a mortgage broker.
They can help you find the best home loan for your personal situation, as well as helping you apply for government grants like the one above.
- Have I researched all the costs?
You need to be aware of all the costs involved in buying a property.
Sure, there’s the price of the house and securing of the home loan, but there are also other, less obvious things, you’ll need to pay for on top of that.
“There are a number of costs associated with buying property, beyond the purchase price of the property that you may not have considered,” explains Mortgage Choice Chief Executive Officer, Susan Mitchell.
“[For example] stamp or transfer duty will vary depending on where you choose to buy the property and how much the property costs.”
“Contact your local State revenue office to find out what your stamp duty is or to take the leg work out, use an online stamp duty calculator,” she says.
Mitchell also suggests considering things like associated legal fees for things like a conveyancer and solicitor, mortgage registration fee that your State/Territory Government charges to register your home loan, transfer of title fee which covers the cost of changing the name of the owner, building and pest inspection costs and moving costs.
These costs can easily be overlooked so you need to do your research thoroughly before you commit.
- Are my finances in order?
With the above in mind, you need to be certain you’ve properly prepared your finances and have proof you can handle all associated costs before applying for a home loan.
“In order to determine your borrowing power, lenders will want to know how many dependents you have, the price of the property you plan to buy, the purpose of the property and how much you earn,” explains Mitchell.
“[Also] what your living expenses are.”
“Living expenses have been at the centre of discussions about home loans over the last 18 months.”
“It is important that you declare all of your living expenses when you apply for a home loan.”
You can work a lot of this information out by using online tools.
“The easiest way to get an indication of your borrowing power would be to use an online calculator where you simply type in your information – and the calculator will generate the amount you may be able to borrow,” says Mitchell.
Once you’ve considered your property purchase from all these angles, you’ll be in a much better place to get into the property market.
And, of course, all the hard work can absolutely be worth it.
* Kassia Byrnes is Travel / Careers / Money Editor at Pedestrian Group Pty Ltd.
This article first appeared at www.businessinsider.com.au
