Once you have made the decision to buy a property, define your current situation, establish your budget and seek legal help and guidance.
Although it’s not always easy to get into the property market, it may be more expensive to stay out of it. That said, there are pros and cons for both
If you’re able to afford a good suburb with growth potential and a range of amenities, you should see capital growth in the value of the property.
But not everyone can afford or even desire to live in that so-called ‘good’ suburb. After all, your first home doesn’t have to be your all-time dream home – and that’s okay. It’s simply your first step onto the property ladder!
Building up equity in a home effectively forces you to save, and accumulate wealth over the long term as:
While renting may be initially cheaper than a mortgage, there is a lifestyle element in the mix, as it provides the opportunity to live in an area you may not otherwise be able to afford to buy into.
Before applying for a home loan you need to work out a budget. Once the difference between what you earn and what you spend is calculated, you’ll soon have a clearer picture of your disposable income. Then …
Generally, the deposit required to secure a property is 10% of the purchase price. If you want to avoid lender’s mortgage insurance, which can cost thousands of dollars, you’ll usually need 20% of the purchase price.
Australian house prices have risen significantly over the past decade and many people feel they are always playing catch-up, trying to save for a deposit.
If you’re finding this scenario challenging, you’re not alone: RAMS has a range of home loans and borrowing solutions to suit different needs.
One way to work out if you’re in a position to service a mortgage is to work out what your monthly payments could be and add this to your current budget, along with anticipated expenses such as rates and other bills.
If you can meet these proposed payments as well as your current obligations, as well as feed, educate and entertain yourself and your dependants, you may be ready to take on a mortgage.
However, if the sums literally don’t add up, review your budget to determine whether any costs can be cut, then factor in a more reasonable repayment schedule based on a cheaper property.
Check out our handy budget planner to help with these sums.
With Australian property prices increasing, more and more first homebuyers are looking at purchasing properties with a partner, friends or relatives (PDF).
However, that old adage; ‘never mix business or borrowing with family or friends’ still bears careful consideration.
That said, plenty of family and friends do manage to successfully negotiate this path. Some benefits to purchasing a property with another person include:
You’re depending on others to honour part of the mortgage agreement over a long period of time
If one person defaults, others have to cover any shortfall (unless otherwise expressly agreed and stated in the mortgage/loan documentation)
The other party may not keep to their promises about maintenance, renovation, etc.
Buying a house may be the most expensive purchase you will ever make. Exactly how expensive should your new home be?
Knowing your financial limits is vital.
The amount you can borrow for a first home purchase is based mostly on your net disposable income. Other factors that could come into play:
You’re usually required to pay Lender’s Mortgage Insurance when you have less than 20% of the purchase price as a deposit.
It’s an upfront fee (PDF) that insures the lender (not you the borrower) against any default on the loan.
If the lender is forced to make a claim under the policy, the insurer will require you to repay the insurer.
There are many home loan products available to suit an array of needs, budgets and situations. Our home loan specialists can discuss your plans, weigh up the options and, if eligible, assist with a first home owner grant (if applicable).
The role of a solicitor or licensed conveyancer is to take responsibility for the conveyancing process, as well as advising you along the way. Engaging their services can minimise the risk of problems arising.
Another consideration: if the property you’re looking at is interstate, it’s often wise to engage a solicitor who practises locally as different laws likely apply across each jurisdiction.
Buying interstate has enough challenges: there’s nothing like local legal knowledge to ward of any potential pitfalls.
There are several ways to locate a solicitor who does property conveyancing: word of mouth, family, bank managers, accountants or co-workers.
Various state-based law societies keep up-to-date lists of accredited conveyancing experts:
Australian Institute of Conveyancers - National Secretariat