9Buying your very first property is a momentous occasion. For many people, it’s many years of hard work and saving. Years of wishing, potentially months of searching, and long nights of waiting for an acceptance on an offer, or approval from a bank. However, the focus is almost always on the end result – having a property. Having that little patch of Australia that you can call your own. Or perhaps you’re choosing to be an investor, to stake your claim on your part of Australia and start the process of securing your financial future.
Either way, you’re going to be faced with a magnitude of tasks from arranging your home loan, building insurance, building inspections and possibly repairs and renovations. It’s very easy to focus on making sure you get the right chairs for your new dining table and leave some of the more mundane, yet more important aspects untouched or half finished. Things you want to make sure you DON’T do when buying your first property are:
- Don’t buy with your heart rather than your head, despite the fact that “home is where the heart is”. Usually, it’s your heart that leads your purchase decision more than your head, however provided you can differentiate between the two and choose to use your head as well is a good start. Often, people fall in love with a particular property that they’ve seen, an emotional desire that when buying a property can sometimes cost you dearly. Similarly, when building a property, it’s easy to say to yourself “well, you only build a house once, I may as well get the extras” and then you spend an additional 2-3 years paying off the mortgage because of this. It’s hard to think practically, but it’s something that your’e going to learn to do. In the most simplistic of terms, we need basic shelter to live and survive, but of course we all work hard to have more than just the basics. It’s basic human desire, however try and work out the long term costs of your decisions. If your’e paying $3,000 per month on a mortgage and you end up paying your mortgage off for 5 years more, it’s going to cost you $180,000 more – and that could make a difference to your retirement plans.
- Don’t forget to do your numbers before, not after you buy. While this may sound quite straight forward, many people are surprised by the cost of running a house. If you’re renting or living at home, you only have to deal with half the costs of running a property. On top of the usage charges such as water, phone and power, you’ve got rates, strata fees (if you buy an apartment), insurance and repairs. These can add up to thousands of dollars and if you’re on a tight budget to start with, can really put some pressure on you. Do the legwork well before you buy the property and you’ll find that everything will be under control.
- Don’t ignore one of the biggest risks to your financial well being – sickness and accident. When you’re paying off the mortgage and trying to get by, it’s easy to either ignore or choose not to take out insurance on one of the most important items in the house – yourself. While most people are happy taking out insurance on their house, their car, their travel and even their jewellery, many people ignore or forget that they can, and should, insure the one thing that pays for all of that insurance and household items, themselves. Income protection, life, TPD (Total and Permanent Disablement) and trauma insurance are all important components of a solid financial plan and should not be forgotten. The number one reason for mortgage defaults in Australia is ultimately due to illness and accident leading to a loss of income. Protect the one thing that makes it all work.
- Don’t skimp on the legals. When you’re scraping together every last cent to buy that first property for yourself, it’s possible that you’ve had to make sacrifices and compromises along the way. When you find the property, it’s possible that you’ll try and minimise your costs when buying the property as well, which can often lead to finding the cheapest conveyancer possible. While a good conveyancer or lawyer may in fact be cheap, not all cheap ones are good. Similarly, just because someone is expensive doesn’t automatically make them good. Ask around, speak to a few people, and ask lots of questions. Most property transactions go through quite smoothly, however if things don’t go well, you want someone good on your side.
- Don’t forget to get finance approval first. While you hear it all the time, many people either forget or ignore the fact that you should be getting bank approval before you buy your first property. Having bank approval before you buy gives you the peace of mind and financial security that, providing you buy an acceptable property, the bank is going to give you the money you need to buy it. The alternative is potentially losing your deposit and being sued for costs and even loss of revenue if the seller doesn’t sell it for as much as what you offered. If your’e not sure if what you’re buying is an acceptable security, ask your mortgage broker or banker to check for you before you sign the contract – it should only take a very short time to do so and again could save you losing your deposit. While it may add a day or two to the process, it’s imperative that you have this sorted out otherwise you’re taking a tremendous risk with your money.
If you would like more information on buying your first property, contact us today. Remember your first consultation is free so you have nothing to lose.