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- 5 minute read
Entering the property game can be a very daunting experience especially when people start throwing around unfamiliar words like equity, security, principal & interest payments and lenders mortgage insurance not to mention expecting you to make decisions about location, loan type and how you are going to save your deposit, it’s enough to make your head spin!
There are myriad of people available to help you every step of the way, and a lot of them will have your best interests at heart but be mindful that there are some that will look after their own interests first so make sure you ask questions to fully understand what you are agreeing to and if you have any doubts ask a trusted friend / family member to go with you.
So where to start?
Well, if you go to a bank or a broker to enquire about a loan, they will want to know that you have the means and intent to repay the loan. You will need to show that you have an income and that your current expenses (such as bills, other loan repayments etc) will leave enough of your income to repay the loan (they call this the ability to service the loan).
They will also want to know that you are able to pay that loan amount consistently so they will look at your savings history. Generally speaking, if you save a regular amount over a long period of time it reflects your commitment to be able to repay a loan.
So, first things first, before visiting a bank or broker get your finances in order, start a budget and set up a regular savings plan. If you have existing loans or credit cards, ensure that you keep repayments up to date and don’t exceed your limits.
If you go to your bank’s website they will likely have various calculators to give you an idea of your borrowing power (how much you can borrow based on your income & expenses), what your repayments would be based on how much you would like to borrow and for what term, and possibly a comparison calculator. It’s a good idea to play around with these calculators, looking at different scenarios and loan types so you can get an idea what suits your needs when it comes to a loan. For instance, they will ask if you want a fixed or variable loan. Both have their own advantages and disadvantages so you will need to decide what works best for your personal situation. For example, if you want flexibility to pay extra off or take advantage of a reducing interest rate then a variable rate would be a consideration for you. However, if you want comfort in knowing what your repayments will be every month and even if interest rates go up yours will remain the same then a fixed rate would be a good option (just remember though that if rates reduce you will be fixed at the higher rate also). Don't be afraid to seek comparison rates from other sources that you don't currently bank with. If you find a better offer elsewhere this can help you negotiate a better rate or fees with your existing bank without moving to another lender. Other costs to consider when purchasing property are legal and conveyancing costs, insurance and government charges, such as Stamp Duty. Government charges vary from state to state and may be impacted if you are purchasing your first home or an investment property.
Once you have an idea about your borrowing power you can start looking at where you want to buy and what type of property. Now is the time to start considering what is important to you when it comes to buying your house. Do you want to be close to work, schools, public transport, cafes, shopping etc? How many bedrooms do you need? (NB: If you are considering a one-bedroom property be sure to discuss this with your bank or broker as they may have certain restrictions around this type of property). Do you need allocated parking? Do you want a yard or terrace or balcony? House or apartment? And so many other options.
If you want some help locating a property, or some advice on particular areas, or maybe you need help negotiating a good price or would like someone attend an auction on your behalf, there are Buyer’s Advocates available. They can assist you with these types of tasks. Again, there are advantages and disadvantages to using this type of service so make sure it’s a service you are happy to pay for. People I have spoken to have expressed gratitude for their buyers advocates for various reasons ranging from saving them time and money, giving them comfort for their knowledge of the market and giving them peace of mind that they don’t have to do their own bidding at auction (trust me, this in itself, can be very daunting!).
Now’s the time to start looking at what properties are available that suit your needs. Don’t be afraid to consider areas close to where you want, they may not be trendy right now but may fit your budget better and who knows what’s going to be trendy in a year or 2 right?? And who says you are going to stay there forever; you might sell it in a few years for a very tidy profit!
This article is predominantly aimed at people who are looking to buy a home to live in, be sure to look out for my future article on purchasing an investment property.
There are myriad of people available to help you every step of the way, and a lot of them will have your best interests at heart but be mindful that there are some that will look after their own interests first so make sure you ask questions to fully understand what you are agreeing to and if you have any doubts ask a trusted friend / family member to go with you.
So where to start?
Well, if you go to a bank or a broker to enquire about a loan, they will want to know that you have the means and intent to repay the loan. You will need to show that you have an income and that your current expenses (such as bills, other loan repayments etc) will leave enough of your income to repay the loan (they call this the ability to service the loan).
They will also want to know that you are able to pay that loan amount consistently so they will look at your savings history. Generally speaking, if you save a regular amount over a long period of time it reflects your commitment to be able to repay a loan.
So, first things first, before visiting a bank or broker get your finances in order, start a budget and set up a regular savings plan. If you have existing loans or credit cards, ensure that you keep repayments up to date and don’t exceed your limits.
If you go to your bank’s website they will likely have various calculators to give you an idea of your borrowing power (how much you can borrow based on your income & expenses), what your repayments would be based on how much you would like to borrow and for what term, and possibly a comparison calculator. It’s a good idea to play around with these calculators, looking at different scenarios and loan types so you can get an idea what suits your needs when it comes to a loan. For instance, they will ask if you want a fixed or variable loan. Both have their own advantages and disadvantages so you will need to decide what works best for your personal situation. For example, if you want flexibility to pay extra off or take advantage of a reducing interest rate then a variable rate would be a consideration for you. However, if you want comfort in knowing what your repayments will be every month and even if interest rates go up yours will remain the same then a fixed rate would be a good option (just remember though that if rates reduce you will be fixed at the higher rate also). Don't be afraid to seek comparison rates from other sources that you don't currently bank with. If you find a better offer elsewhere this can help you negotiate a better rate or fees with your existing bank without moving to another lender. Other costs to consider when purchasing property are legal and conveyancing costs, insurance and government charges, such as Stamp Duty. Government charges vary from state to state and may be impacted if you are purchasing your first home or an investment property.
Once you have an idea about your borrowing power you can start looking at where you want to buy and what type of property. Now is the time to start considering what is important to you when it comes to buying your house. Do you want to be close to work, schools, public transport, cafes, shopping etc? How many bedrooms do you need? (NB: If you are considering a one-bedroom property be sure to discuss this with your bank or broker as they may have certain restrictions around this type of property). Do you need allocated parking? Do you want a yard or terrace or balcony? House or apartment? And so many other options.
If you want some help locating a property, or some advice on particular areas, or maybe you need help negotiating a good price or would like someone attend an auction on your behalf, there are Buyer’s Advocates available. They can assist you with these types of tasks. Again, there are advantages and disadvantages to using this type of service so make sure it’s a service you are happy to pay for. People I have spoken to have expressed gratitude for their buyers advocates for various reasons ranging from saving them time and money, giving them comfort for their knowledge of the market and giving them peace of mind that they don’t have to do their own bidding at auction (trust me, this in itself, can be very daunting!).
Now’s the time to start looking at what properties are available that suit your needs. Don’t be afraid to consider areas close to where you want, they may not be trendy right now but may fit your budget better and who knows what’s going to be trendy in a year or 2 right?? And who says you are going to stay there forever; you might sell it in a few years for a very tidy profit!
This article is predominantly aimed at people who are looking to buy a home to live in, be sure to look out for my future article on purchasing an investment property.