So you’ve saved what you think will be enough to get you a loan to buy your first home. That’s a good start, now you need to talk to a lender who will fill you in on the cost associated with the loan. Here are all the thing you need to consider when buying your first home.
For example, apart from the normal Bank fees on a loan, you may also need Lenders Mortgage Insurance (LMI). This is a requirement if the deposit amount ratio is less than 20% of the lenders assessed value of the property , that means you have a Loan to valuation ratio (LVR) of of more than 80% , so the lender needs to protect themselves in case you default on the loan.
This will be a once-only fee and your Conveyancer will explain why it’s necessary to have a professional assist you through the purchasing process.
Now you have to be sure you can service this debt you are taking on.
The lender will assess this based on your income, or combined incomes if there are two or more borrowers, and your day to day living expenses will need to be scrutinised.
Buying Your First Home – 4 Things To Consider
You may be currently renting, and paying more than you will be paying for a mortgage, but consider what other costs are added to home ownership that may be currently covered by your landlord:
- Land rates
- Water rates
- Building insurance
- Strata management fees or levies ( apartment / townhouse)
These added payments must be added into your current monthly expenses:
- car insurance
- health insurance
- Motor vehicle running costs
- Contents Insurance
If these payments can be met comfortably when added to your loan repayment, that’s a good start, but it is wise to have some money in reserve for emergencies.
Attention To Detail
Most people when buying a home want to add their own personal touches, in particular if buying an older home that needs some updating, that will involve minor renovation, possibly just small things like re locating power points, or upgrading your power board to a higher phase, or changing the plumbing in the bathroom. These can be relatively minor costs, however, issues may arise that you were not expecting, such as major electrical wiring faults that occur soon after you move in, or plumbing or draining problems that were not detected beforehand, and these can be costly events.
Make sure you have a fund put aside for such contingencies, then you know you can relax, in the knowledge that what you have taken on is totally manageable.
You may be considering buying a run down property because the price is right and it’s in a good street, in a good suburb, and your plan would be to live there while you renovate.
Or the home is fine but not completely your style, and who doesn’t want a new kitchen or bathroom?
The Realestate.com.au website has a section referring to renovations on each buyers advertisement stating that improvements like that could set you back around $30-$34K, and that could be just for the kitchen!
Long Term Planning
Maybe you should consider that as a longer term plan, and commit to living in the property for a while until you build up your savings and increase your equity as the value of your home increases, and Lenders are always happy to leverage off the increased value and lend you money for improvements.
This increased value over time will allow you to borrow to purchase a second property as an investment, or sell the original to buy another home, perhaps the forever home you’ve dreamed of.
The first purchase will be the building block for your future. If you have all the savings and income you need to make it affordable you are on top of the game and your future is secured.
Feel free to call our office to see how we can help you buying your first home.