• Busted: 5 property ownership myths

    If you believe the nay-sayers, it’s impossible for a young person in Australia to save for and buy a home nowadays. But what would they know?

  • If you believe the nay-sayers, it’s impossible for a young person in Australia to save for and buy a home nowadays. But what would they know?

    Scott Cheetham, a RAMS Home Loan Specialist from Mona Vale in Sydney and 29-year-old Bonnie Caine, who purchased a one-bed off-the-plan apartment in NSW’s Sutherland Shire in August 2014, explain a very different reality.

    From “You have to have a 20% deposit” to “All your money goes to the mortgage and you can’t enjoy life”, Scott and Bonnie debunk five common property buying and ownership myths.

    Myth 1: You have to have a 20% deposit

    Scott says the biggest myth is around deposit amount. It’s not true that buyers always need 20%, he explains.

    “Depending on the purchase price and if you are a first-home buyer, you could be looking at a deposit of around 9%, including costs,” Scott says.

    “In this instance, you will need to pay Lender’s Mortgage Insurance (LMI), which is a one-off insurance premium, however, it means you can get off the rental treadmill and it allows you to enter the market sooner.”

    “The notion of paying LMI is widely becoming more accepted among younger buyers,” Scott says.

    Bonnie, who purchased her apartment for just under $600,000 with a 5% deposit, agreed. “If you’re buying off-the-plan, you may be able to negotiate a lower deposit,” she says.

    Bonnie, an account manager, wasn’t too concerned about LMI. “Paying LMI meant I was able to get into the property market sooner and experience capital growth. Since I purchased my property it has gone up by more than 10 times the LMI fee,” she says.

    Myth 2: It’s too darn hard to save a deposit

    It’s not impossible to save, even in an expensive city like Sydney, Bonnie says. “Don’t get caught up in ‘it’s too hard’. You have to start somewhere,” she says.

    “The saying ‘you can’t have your cake and eat it too’ rings true when you’re saving or own a property,” Bonnie says. It takes realism, planning and sacrifice.

    Get real about what is and isn’t affordable, set a budget and start a dedicated savings account separate to your everyday banking, she says.

    “My favourite tip is to know what your core values are,” Bonnie says. “My values are family, friends and entertainment. Knowing this means I will allow a certain budget for these values. This way, you don’t resent saving, because you are still fuelling your core values and passions and getting the best of both worlds,” she says.

    Scott says those stuck in the “it’s too hard” headspace should get advice. “Speak to a professional, so you know what’s achievable in your circumstances,” he says. If the news is bad, adjust.

    “Ask what do you need to do to make what you want happen? Then, you can set appropriate goals. For some this might be to save a little more or others might be to repay a credit card,” Scott says.

    “Once you know what can be achieved, you can make decisions and set goals, be sure to monitor your progress and make them achievable,” he says.

    Myth 3: You have to inspect hundreds of properties before buying

    Bonnie’s experience is proof buying a property doesn’t necessarily require endless Saturday mornings spent at open for inspections.

    “My brother actually drove passed the development office of the building I ended up buying in and told me about, so I was able to avoid all that,” she says.

    Bonnie also recommends using online searches strategically. 

    Busted 5 property ownership myths - girl on phone

    Make use of your property apps to save searches and keep your eye on the market. Picture: Kate Hunter

    Myth 4: All your money goes to the mortgage and you can’t enjoy life

    The same discipline used to save a deposit can be applied to life with a mortgage, Bonnie says.

    “Your circumstances could change when you get the loan and you can always take up extra work too, even if it’s dog-walking or babysitting. There are lots of ways to make extra cash if you really need to,” she adds.

    Myth 5: The market is going to crash!

    Scott says even the best economists can get it wrong. “Property is a long-term vision and you need somewhere to live, so if you are ready, now could be the best time to get onto the property ladder,” he says.

    “You need to be pragmatic around what your budget can afford. This may mean you need to look at other areas that offer similar attributes that you are looking for, however may be further out from the CBD. At RAMS Mona Vale we regularly see people looking to the Central Coast (of New South Wales) as an option,” Scott says.

    Bonnie advises listening to those in the know. “You always hear people say ‘the market is going to crash’ or ‘it’s not a good time to buy’. This could be true, but make sure the advice you’re getting is coming from a professional, not just someone who has an opinion.”

     

    Originally published on flatmates.com.au

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  • Disclaimer:

    While such material is published with permission, RAMS is not responsible for its accuracy or completeness.  This information is general in nature and has been prepared without taking your objectives, needs and overall financial situation into account. For this reason, you should consider the appropriateness of the information to your own circumstances and, if necessary, seek appropriate professional advice.