You’re first home buyers who have overcome all the doubts of buying your first home and you’ve decided to take the plunge. So, what happens next? Needless to say, the more information you have, the better decisions that you will make. Apart from all the nitty gritty issues like, how much deposit do you need; the First Home Buyers’ Grant; stamp duty; how much can you borrow; etc, etc, (Consumer Affairs websites of various states are very useful resource for research) there are more important issues that I would like to discuss here.
1. UNDERSTAND THE LEGALITIES
When you sign a contract of sale, you have entered into a legally enforceable agreement to purchase the property at the agreed price payable at the agreed settlement date. The important thing to note:
- It is “legally enforceable” which means you can lose your deposit if you fail to settle.
- The vendor has the right to take you to court to force you to buy the property or to compensate him/her for any loses incurred.
Law of contracts apply to property purchase and it’s a good idea that you have a working knowledge of contract law. When you are entering into a contract to purchase real estate, it would be one of the biggest decisions that you will make and you owe it to yourself to understand the rights and obligations under the contract. Seeking legal advice would be a very smart move to avoid any potential grieve.
2. WHERE DO YOU WANT TO LIVE?
Before other considerations, perhaps the most important question you need to ask yourself is “where do I want to live?”
When you have decided to purchase your first home, your sub conscious mind will go to work without you even realising it. You will primarily be influenced by the distance to work and research has shown that it’s the key driver to how people locate their home.
This will be followed by other factors like:
- your social and support (family)networks,
- easy access to government facilities,
- transport, shopping, enterainment and so on.
These are important considerations and ideally we would all like to live close to work with the best amenities. Unfortunately, most first home buyers will be working with a limited budget and you will need to balance all your selection criteria for the best outcome in term of maximasing your investment. This then, lead me to the next point…
3. BE REALISTIC
Like I had mentioned, we all like to live close to work , our parents and our network. From my experience, this is almost always not attainable for first buyers.
This is so for a couple of reasons:
- Firstly, bearing in mind that we all like to live close to where we work and the city is where the bulk of the jobs are, the areas close to the city will be beyond the reach of most first home buyers in terms of price.
- If you want to live near to your parents, remember that they’ve bought their homes 20 to 30 years ago when prices were low and it’ll cost a fair bit in their suburbs now.
The message here is be realistic and be prepared to compromise on what is ideal. If it’s further out or a lesser home, so be it. The idea is to get into the market as soon as possible because if your are not in the market, you are not in the game-the game of building wealth and equity through the increase in your home value.
4.LOCATION, LOCATION, LOCATION
You hear this often enough but, in this instance use this as your gospel and I’ll tell you why.
Never look for your dream home or build it when you’re buying your first home. Your job is to locate it the best that you can and that your budget will allow. Buy something more modest but, close to major job centre. Locations closest to job centres will always have the best growth potential because one of the major key drives of property prices is its proximity to jobs.
The principle here is to locate your first home well to allow it to increase in value fast. You do not want a dream home because dream homes are not attainable with the first purchase-not with the majority of first home buyers, anyway. You want to allow it the best opportunity to appreciate in value and to use it as a stepping stone towards your next home, or perhaps your dream home.
5. THE RULE OF NON PERMANENCY.
Now I shall elaborate on why you do not want to focus on buying your dream home with your first purchase.
For a good majority of first home buyers, their first home will never be their last home. There are a couple of reasons: ·
- Peoples’ needs will change. A young couple will have children and will need more space like the extra bedroom and the backyard. What seemed like a dream home can suddenly become claustrophobic under such circumstances. ·
- A young couple might go their separate ways. Ouch!...(Can't see that coming in a million years?)
While there’s always a chance of that happening, it’s always better to use the first home as a stepping stone for better things to come. ABS has statistics to say that an average of 5 years is the length of time that most first home buyers will keep their first home and move on for whatever reasons.
6. FIND A GOOD MORTGAGE BROKER.
In my opinion, this is the most critical consideration. Do not underestimate the value a good broker can add to your journey. Not only will he be able to find the right home loan and save you thousands of dollars, he can also be a good resource in your education of home ownership and home loans. In the longer run, he can help you build wealth through investing in real estate through education and make available to you a team of experts to facilitate the process e.g financial planners, property reaserchers, etc
Of course there are other considerations, far too many, for an important issue like buying your first home and taking on a home loan to list them all in this article. Maybe, I will discuss more considerations at a later stage. Meanwhile, if you have any questions on any issues that I have left out, please feel free to me on 0413 871 888.