It’s never been harder to be a first home buyer.
Cashed up investors are dominating the market, house prices are soaring and the government grants have dried up, but don’t let that put you off.
Here’s some advice from the experts on how to own your first property:
It’s important to demonstrate a strong savings history to potential lenders, says Michael Russell, chief executive of home loan broker Mortgage Choice.
“We like to see first home buyers or investors that have a good track record and good discipline around saving, to really prepare them for that increased commitment,” he says.
Ideally, you should have a decent deposit – 20 per cent is best – and extra cash for all the fees and taxes, including stamp duty.
Mr Russell advises speaking to a mortgage broker a year before you’re ready to buy to get an idea of what you’re up against, and how you can prepare.
Douglas Driscoll, chief executive of real estate group Starr Partners, says it helps to speak to family and friends who’ve done it before.
“Prices may have increased exponentially over time, but the life lessons and commitment required to finance, purchase, maintain and sell a property are still much the same as they were 30 years ago,” he says.
“To use an old Chinese proverb, to know the road ahead, always ask those coming back.”
Get on the property ladder any way you can, whether as an owner-occupier or investor, Mr Russell says.
He says first home buyers are increasingly opting to buy investment properties in areas they can afford, while continuing to rent in areas they want to live.
Mr Driscoll says property prices will only keep rising, so start small and get climbing.
Make informed decisions but also take risks, and stop waiting for the `right time’, he says.
“See your first purchase as an opportunity to make capital gains and equity on the property so that you’re better equipped to progress to a more substantial investment in the future,” he says.
DON’T BORROW TOO MUCH
Interest rates are at record lows, so make sure you factor in future rate hikes when calculating your budget, making sure your mortgage repayments leave room to pay bills, save money and live comfortably, Mr Driscoll says.
Consider buying with a trusted family member or friend.
“By sharing the deposit and mortgage repayments you should be able to raise enough capital for future investments,” Mr Driscoll says.
“Be sure to have all the necessary legal checks and balances in place, such as clauses on the right of refusal and the terms of any future sale or buyout.”
WORK YOUR WAY UP
If you can’t afford to buy in your dream suburb, work your way up.
Do your research and see what suburbs are next to take off by looking at what developments are planned and spotting early signs of transformation, Mr Driscoll says.
“Talk to your real estate agent or an agent in the suburb you had your eye on,” he says.
“They should offer helpful advice on any pockets of surrounding suburbs that offer plenty of value.”