Purchasing a home is massive… you have to be sure you’re ready before you take the leap.
There are many reasons to say “I do” to a mortgage, from historic low interest rates to the comforting warmth and convenience of owning your own home. But before you take the plunge with property to the next level, ask yourself these questions to figure out if you’re ready or not.
Are you in it for the long haul?
Buying your first home is an emotional process, not just a financial one. Buying a home is a big deal, you have to know that you truly want a home before you can set about acquiring your first loan.
Ask yourself why you want a property. Do you really want to lay down roots somewhere and turn that house into a home? Or is it simply something you want to do on a whim?
Are you able to invest?
Generally speaking, the bigger the deposit the better. The more you can pay upfront, the less you’ll have to borrow and the lower your repayments will be.
While some lenders may lend up to 95%, as a first homebuyer you’ll be looked upon far more favourably by many more lenders if you’ve been able to save between 10 – 20% of the property value as a deposit.
The more savings you have at the time of purchase the better.
Sometimes it can be a good idea to have a little in reserve after buying. If you have $70,000 saved, consider keeping $10,000 in your redraw or offset account. It will give you a buffer in case something changes your financial position i.e. starting a family, temporary unemployment or a career change.
Another option you might want to explore is getting help from your parents. If you have a good income but you’re short on your deposit, a guarantor can help you getting a home loan without a large deposit. It can be worth asking parents about this early, and if they’re willing, they can help you get in your own home sooner.
Are you aware of your ‘previous borrowings’?
When you’re applying for a loan, a lender will take many factors into consideration before calculating how much you can borrow. This is often known as your ‘borrowing power’.
Improve your borrowing power by:-
• Consolidating your debt
• Lowering your credit card limit
• Keeping your financials up to date
• Saving a larger deposit
• Resolving any blemishes on your credit history
Asking yourself these 3 questions can put you in shape to achieve the great Australian dream of owning your own home!