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July 20, 2016
When it comes to getting a foothold in the property market, the financial and emotional challenges that face first home buyers are real (regardless of Baby Boomers’ “pull-your-socks-up accusations that they’ve got it easy).
As it turns out, 72% of prospective buyers are most concerned about not being able to afford their dream location, while 62% are anxious about saving for a deposit, according to a recent survey released by finder.com.au.
In terms of need financial assistance, 1 in 3 first home buyers believe they will need help from their parents either financially or by having them as a guarantor or landlord.
Given the skyrocketing property prices in the current market, how can first home buyers achieve home ownership without compromising their financial well being (or their sanity)?
? Get pre-approved. Applying for pre-approval can help you enter the market with confidence. With a pre-approved home loan under your belt, a lender will consider you a more serious buyer compared to someone who is just “looking.” In essence, this means a lender has reviewed your financial position and granted you a pre-approved amount to borrow.
? Aim for a large deposit. One of the smartest things you can do as a first home buyer is to complete at least a 20% deposit so that you can avoid paying lender’s mortgage insurance (LMI). This will put you in better stead to service your upfront and ongoing home loan and property expenses.
? Check out available government assistance. Each state government offers a level of support for first home buyers in the form of grants or stamp duty concessions which can save you heaps. Do your legwork and see what kind of assistance is on offer.
? Lower your existing debt. Before you apply for a home loan, clean up your debt. For example, if you’re struggling to meet your credit card repayments, then think about taking out a 0% balance transfer card so that you can benefit from an interest-free period. Plus, there are plenty of tips on the Australian Securities and Investments Commission (ASIC) website if you need some guidance.
? Ask parents to go guarantor. If your parent or guardian is in a position to go guarantor on your home loan, this could be a huge help in getting your application over the line. Speak to your parents about whether or not this is a realistic solution, or otherwise consult another family member.
? Consider co-ownership. Co-ownership can be a good way for you to share the costs of homeownership and to break into the property market sooner. However, just make sure that you clearly lay down the ground rules before entering into this kind of arrangement. It’s sensible to get a co-ownership agreement drawn up that sets out the rights and obligations of each person with a share in the property.
? Keep your cool. Buying a property can be an emotionally-charged event so try to be patient, and remain calm. Remember, there is help out there. Whether it’s from your family or experts such as a mortgage broker or an accountant, take advantage of the support around you.
There’s no doubt that buying property requires dedication and persistence, but given that you do your research, prove that you have financial discipline, and seek help where it is needed, you’ll be on your way to securing some bricks and mortar.
Bessie Hassan is the Money Expert at finder.com.au, one of Australia’s biggest comparison websites.
NB....Home Addressed still highly recommends home co-ownership as it is the fastest and smartest way to fast track your home ownership aspirations.