• First Home Buyers: Preparing for home ownership

    First Home Buyers: Preparing for home ownership

    They say practice makes perfect, so if you’re saving for a home and want to prepare for life with a mortgage, why not live like you have one already?

    Stephen Villios, a RAMS home loan specialist from Unley in South Australia, says understanding what your finances will look like with a mortgage thrown in the mix – before you get one – and living within those limits, is a great idea.

    “One of the first things we do with first time buyers is sit down with them and work out a budget, so they can clearly see what their income and expenses are,” Stephen says.

    “This step helps them to understand how much they are capable of saving – to put towards a deposit – but it’s also something you can adjust to reflect what it will look like once you have a home loan,” he adds.

    “If you rely on card and online payments for much of your spending, looking back through bank transactions, line by line, and allocating expenses to different categories can be powerful and useful,” Stephen says.

    It’s also sometimes a bit of a wake-up call, he adds. “I spend how much on takeaway coffee a week?” is a common response. 

    The ‘practice makes perfect’ approach

    Stephen says most bank accounts allow transactions to be exported electronically, so it’s straightforward to collate expenses in a spreadsheet. 

    Tweaking your budget to reflect the financial reality of a mortgage is simple. Living by it for several months before taking the mortgage plunge will give a pretty good indication of your ability to cope, Stephen adds.

    “Many people who are saving for a deposit live in a share house, so you need to think about all the different and additional costs you’ll have as a home owner,” he says. 

    Stephen lists some of the “now I have a mortgage” costs first-timers need to factor into their new budgets. 

    • Mortgage repayments.
    • Council rates and charges.
    • Strata costs when buying an apartment.
    • Insurances.
    • Allocation for regular maintenance and unplanned repairs.
    • Full costs of all bills. 

    “We recommend people do a ‘dry run’ for three to six months to set the scene,” Stephen says.

    Brad Cullen, a 39-year-old grain marketer from regional Victoria, adopted the “practice makes perfect” approach recommended by Stephen in preparation for buying his first home; a two-bedroom California bungalow in Bendigo, in his mid-20s.

    Brad, who recently sold his first home to buy a second, says the tactic helped him “wrap his head around” having a mortgage and house to maintain, after years of sharing houses and expenses. 

    “It’s one thing to know, on paper, how much having your own house and a mortgage costs, but it’s another thing entirely to actually budget for it and live within those constraints,” he says.

    “Saving for a deposit is hard work, of course, but it’s just what you have to do to get on the property ladder. I figured I was already being smart about my spending, so I might as well prepare for what it would be like once I actually took on a home loan,” Brad says.

    “I’m glad I did, because it really opened my eyes and showed me the discipline required. It’s definitely something I would recommend to people currently saving up for a deposit,” he says.

     

    Originally published on flatmates.com.au

     

    About the author

    • Raymond

      Raymond A Ram is the RAMbassador for RAMS Financial Group. Raymond works with the RAMS team to bring simple, helpful and expert information on home loans and savings accounts to life with his down to earth and cheeky personality. He enjoys seeing everyday Australians turn their dreams of saving for a goal or getting into a home a reality. 

      Growing up in Goulburn, NSW, Raymond was brought up with good old-fashioned Aussie values of hard work and a fair go. It soon became apparent that Raymond wasn't content for the conventional path of grazing, producing the very best wool, and finding a nice sheep to settle down with. So it wasn't long before his passion for performing and his talent as a likeable larrikin shone through - landing him a few roles such as 'RAMlet'. He was even tipped to play RAM-bo at one point but chose to become star of the small screen instead as RAMbassador for RAMS. He now finds this role so much more rewarding.

      Contact your local RAMS Home Loan Centre about your home loan options.

      Raymond A Ram
     

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    The information here is of a general nature only and is not intended to constitute financial or tax advice. You should consult your professional adviser, accountant or taxation expert for advice specific to your personal circumstances.

    The views and opinions expressed in this article are those of the author alone and do not necessarily represent the views or opinions of RAMS Financial Group Pty Ltd ABN 30 105 207 538 (RAMS),  Westpac Banking Corporation ABN 33 007 457 141 (Westpac) or their related bodies corporate. This article is strictly for information purposes only and neither RAMS, Westpac nor any of their related bodies corporate make any representation as to the accuracy or completeness of the information in this article or endorse the views expressed in it.