5 Financial Pitfalls to Avoid When Buying Your First Home
There’s no end of things to bear in mind when buying your first home. In fact, it can be easy to be overwhelmed. In our experience with home buyers over, we’ve noticed that there are many lessons that are often only learnt once the property purchase has been completed. Indeed, like many things in life, we often look back and wish we could have avoided some mistakes made. Don't let this be you! Read on to uncover some of the common property purchasing pitfalls.
Waiting Until You have 20% Deposit
You often hear it said that you must have at least 20% deposit before you can consider buying your first home. If you consider that this amounts to a $100,000 deposit on a $500,000 home, it could feel like forever before you have made the required deposit. However, whilst many lenders have this stipulation, there are many that do not. Indeed, people with adequate income and minimal debt levels have received loans with as little 5% deposit.
Takeaway: You might not have to wait until you have a 20% deposit saved before you speak to your lender or financial advisor. It is never too early to start becoming informed!
Not taking advantage of the Home Builder Grant $25K and First 15K Home buyers Grant.
If you are a first home buyer who is buying a new home or new build, you might be eligible for both the first home buyer grant and home builder grant to put towards your new home. Check out this article here (Insert Link to PBL Blog 11 of 12 V 1.0 READ THIS: How to save more than 50K when buying your first home. ) for more information on the current support available to first home buyers.
Comparing Mortgage Payments to Rent
It is easy to think that if you are paying substantial rent then you should logically be able to afford the same level of mortgage payments. This is simply not true.
There are a number of ongoing rates associated with home ownership including council and water rates, insurance, management fees (if applicable), not to mention actual maintenance of the property itself. The list goes on, and it often comes as a shock to new homeowners.
It's important to have an appreciation of the true costs of owning and running your new home before considering a mortgage.
Not understanding interest rates
A mortgage is more than simply figuring out what your repayments are. Is your rate a variable rate or fixed rate mortgage? When interest rates are low (as they currently are), lenders are often more willing to lend, and buyers can often overextend themselves not realising that when interest rates go up, then their monthly payments can also increase considerably. Interest rates vary depending on the amount of the loan, the term of the loan and other factors such as your unique circumstances. Online calculators are a good start, but don't rely on them - it is always best to speak to an independent financial advisor.
Blowing your budget looking for “the perfect house”
This is probably the most frequently occuring and obvious pitfall that many people still make. We get it - everybody wants their first home to be their perfect home. However, many first time buyers working within a budget are often disappointed, and are tempted to go over budget to purchase something they may struggle to repay. The thing to remember is that there really is no perfect home. Decide first on what are your ‘must haves’ versus ; ‘would be nice to haves’. If being close to town or the city is important to you, then you might not be able to have a larger garder. It is about compromise.
Starting out with this in mind and staying within your means means that you are more likely to find a property that you fall in love with, and importantly, that you won't later regret owning.
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