If you’re young and dumb and always wanted to run to the streets ’cause you though that was where it was at OR are a Gen Y’er, living in Sydney, and trying to buy your first home, then we’re in the same rowboat (paddling and getting nowhere). The Mrs and I have been pretty caught up in the buzz and excitement of property this last quarter of 2013. Wow oh wow has it been a rollercoaster. I just wanted to give a few tips to any other potential first home buyers out there so that they can avoid some of the traps and pitfalls we’ve experienced:
- Don’t be fooled by the FHOG. Sure, $15,000 is quite a bit of money BUT when you’re buying brand new (say ~$550k) keep in mind that this “grant” makes up 2% of the value of your house.
- Don’t skim on Building and Pest Inspection Reports. These might cost you a few hundred dollars but could save you thousands of dollars, migraines, heartache, stress, health problems, diabetes etc etc.
- Save, Save, Save. The biggest hurdle for any first purchaser is the initial deposit. You’ll most likely be paying LMI (lenders mortgage insurance) if you don’t have at least a 20% deposit (typically over $100k). I know that some people in our generation have the opportunity to save this much before they turn 25 but for the majority of us, this just isn’t possible.
- If you’re young and not looking to buy for a few years, open a First Home Savers Account. BUT don’t put all your eggs in one basket. Put in at least $6,000 a year to reap the benefits of a $1,000 gov’t contribution and save the rest in your everyday savings account. This way you can use the liquid cash if you need and get the maximum return from the government. At the end of your account period (4 years) you would’ve received a free $4,000 from your friends in ACT.
- The LMI you pay grows exponentially from borrowing 80% going up to 100%. So don’t borrow more than you can chew. Do your best to borrow less than 90% because anything higher is going to cost you some serious money.
- If you’ve found a place you like, talk to your potential neighbors. Don’t be anti. Seriously. You may find out insightful information like who the previous owners were, whether the house is haunted etc.
- Don’t feel pressured to buy just because interest rates are at an all time low. It’s a sellers market right now and yes our generation is being priced out BUT just keep saving.
If I think of anything else I’ll add a new post. Good luck to anyone and everyone in the same boat. Let’s paddle together.
Disclaimer: I’m not a financial expert, mortgage broker, money guru etc. I’m just your friendly, neighborhood spiderma…. IT guy 🙂