Affordability means different things to different people. For first-time buyers, it’s all about spending power. At its simplest, affordability is the constant juggling between your wants, needs, budget and bank balance. Like it or not, the latter will be the single biggest factor in determining the choice available to you.
If you are contemplating taking the leap into home ownership, it pays to be informed about the realities of the Great Australian Dream. Even if your bank balance is less than you’d hope, there is never a better time than now to begin your research.
Visiting new estates and inspecting display homes allows you a touch-and-feel experience and helps you work out what you’d like in your home, but knowing what you can afford is the next step. Familiarise yourself with what you can borrow by using an online loan calculator. This will give you a ballpark figure of what amount may be borrowed. Then make an appointment with a lender to learn about types of loans, fees, repayments and the First Home Owner Grant.
If you’re yet to start saving, write down a monthly budget, and stick to it. This should incorporate all your income and expenditure, paying particular attention to savings, rent, loan and credit card repayments, food, clothing and holidays, phone and utility expenses, motor vehicle costs and any other incidentals that affect your bottom line.
While your deposit is gradually taking shape, get the green light for house hunting from lenders by gaining pre-approval. The pre-approved amount usually applies for a set time, and sets a limit on what you can borrow. But it allows prospective buyers the chance to put their plans into action.
Saving requires immense discipline to reach your goal, but it’s worth reminding yourself exactly what your priorities are. Besides the sale price, the not-insubstantial matters of stamp duty, settlement and mortgage costs, home insurance, removalist costs and conveyancing are also due, the sum of which can surprise first-time buyers. Also factor in a contingency fund for emergencies.
A word of advice: It is rare to find the perfect home, so compromise is often required. One may have to settle for a smaller home in your preferred location, or a move further out if a bigger home is the priority. Either way, your financial strength and gut instinct will highlight which is more appropriate.
Home ownership can be extremely rewarding, but it brings with it great responsibility. If the sums, sentiment and all the boxes are ticked, you’re on a winner. But if the emotions and finances don’t balance out, it will pay to steer clear – for the time being.
Living it up and home buying aren’t necessarily compatible, but with good planning it is possible to enjoy the best of both worlds.
Words: Ross McGravie