Making the move from renting to buying your own home can be a really exciting time. It allows you to say goodbye to having a landlord, house inspections and changes to your housing situation at the whim of the property owner. Instead of paying off someone else’s mortgage and asset, you can start paying off your own asset and have freedom to do what you like with your home. These are just a few of the positives of owning a home verse renting.
While an exciting time, buying a home is one of the biggest financial commitments and investments most of us will make in our lifetime. With such a big commitment, there are a lot of things to consider before buying. Here’s a look at some of the most important things you’ll need to do and consider when making the move to home ownership.
Work out what you can afford
Before you can begin looking at properties and visualising your dream home, you’ll need to work out what you can realistically afford. You can use an online mortgage calculator to figure out how much you can borrow based on the amount you can afford to pay back. Once you’re armed with this information, take a look at property prices in the area you’re interested in buying in – perhaps you won’t need to borrow as much as you can afford, or you may find you need to adjust the sort of property you intend to buy based on what you can borrow.
If you’re a first home buyer, you may be eligible for a first home owner’s grant which you can factor in to your purchasing power as well.
New expenses to consider
When you’re working out the mortgage payments you can afford, you’ll also need to take into consideration the additional costs that come with owning a home that you don’t have to worry about when you rent.
The regular costs you’ll need to factor into your budget include Council rates, body corporate fees (if you buy an apartment or townhouse) and house insurance. You’ll also need to consider that you’ll be responsible for general repairs and maintenance on the house. While there’s no hard and fast figure on how much you’ll need for repairs and maintenance, there is a popular rule of thumb to budget for 1% of the price of the property. As an example, if you purchase a property for $300,000, you’d budget around $3,000 per year for repairs and maintenance.
Save a deposit
Basically the larger deposit you have when you’re purchasing a home the better. Generally you should aim to have at least a 20% deposit plus enough extra to cover purchase costs such as stamp duty and legal fees.
Not only does having a good deposit mean you have to borrow less, and therefore pay interest on less money, but it is also looked at favourably by lenders. If you need to borrow more than 80% of the purchase price of the property, your lender will more than likely charge you lenders mortgage insurance which can be several thousand dollars. This insurance is to protect the lender in the event that you default on your mortgage.
Choosing a home loan
Gone are the days of just getting your home loan through your regular bank; there are many different home loans available from various lenders and shopping around can really pay off. Finding a home loan and lender that suits your circumstances could potentially save you thousands of dollars.
Among the various lenders and home loan products out there, you’ll find different repayment structures, interest rates, fees and features. There are many online comparison tools to help you get an overview of the different loans, or if you don’t want to do the shopping around yourself, a licensed mortgage broker can help to explain the different options and help find the right loan for you.
Making the move from renting to owning a home involves a lot of research and planning, but the more you prepare the better you can set yourself up for success.
Lend Me – Car & Home Loan Brokers – Perth, Western Australia