Australia’s house prices have been steadily rising for years, and for those not yet in the housing market, every interest rate announcement can feel more and more discouraging. Couple that with the ever-increasing cost of living, the exorbitant amounts landlords charge for rent impacting the ability to save, and the competitive nature of the housing market, and owning your first home can feel like a distant dream. But while it’s tough and can feel overwhelming, with the right strategy and support, breaking into the market is possible.
Step 1. Understand Your Financial Position
Financial literacy is an essential first step to being able to buy that first home. You have to be able to understand where you stand before taking on a large amount of debt. Take an in-depth review of your current income, expenses, debts, and savings, and set out a clear plan for budgeting and financial planning. These will all impact your future borrowing power.
When applying for a mortgage, lenders will take into account your income, current savings, current debts, living costs and expenses, and any credit history you may have. Speaking to professionals like a financial planner before engaging a bank for a mortgage can help you sort through everything and get an idea what what is or isn’t realistic for your specific financial situation.
Step 2. Consider Government Grants and Incentives
As a first home buyer, you may qualify for a number of incentives, grants or schemes to help you break into the housing market. This is where a broker can help, as they’ll understand the different options and will be able to identify the best ones for you based on your unique situation.
You could be eligible for something like the 5% Deposit Scheme, which allows eligible home buyers to purchase a house with only a 5% deposit, compared to the usual 10-20% expectation, or the First Home Super Saver Scheme, which allows people to make voluntary contributions to their superannuation accounts, thus reducing the tax charged on their savings. Talk to financial professionals or your broker for all the details and for help when applying for these schemes.
Step 3. Pre-Approval and Professional Advice
Once you have a handle on your financial position, now may be the time to start talking to banks and seeking pre-approval. This is the process of submitting all your financial documents to a mortgage lender and being assessed for how much money you can borrow. Once you receive your pre-approval, you’ll know how much you can spend on a home and begin making conditional offers on properties.
Working with an experienced mortgage broker from Essendon or someone who understands your local housing market can help you navigate loan options and improve your chances of success, especially if you’re buying in a competitive market. Working with a mortgage broker means you’ll have an intermediary between you and the lender. They’re a professional who will work with you in your best interests to secure the right loan for you and your financial position, and help make the whole process far less stressful, particularly for first home buyers who may feel like they’re flying blind.
Step 4. Think about All Your Options
There is more to first home ownership than the classic three-bed in the suburb or chic innercity apartment. Depending on the city and area you’re looking to buy in, the costs may be exorbitant, and getting that first foot on the housing market ladder can build your equity and get you closer to your dream home.
Consider buying a smaller property, something further out of the city or in a regional town, or even ‘rentvesting’, which allows you to continue renting in your preferred area while renting out the property you bought in a more affordable area. Whatever you decide to do, keep in mind that it’s likely that you’ll have to make a few compromises. That may be size, location or property type. Just remember that getting on the housing ladder is not the final step, it’s the first.
Buying your first home can be daunting. There are lots of moving parts, an almost endless list of extra costs and fees, and taking this on for the first time can be intimidating. Gone are the days of our grandparents buying their first home or block of land for a few months’ wages. But with the right support and professional advice, it is within reach. Having a solid understanding of your financial situation, a good saving strategy, and a mortgage broker to help with the process, you’ll be moving into your new house in no time.
