July 14, 2016
At some stage you may start thinking about stepping up to your next property. We explain how to maximise your buying power.
Reaching the next rung of the property ladder isn’t as easy hanging up a ‘For sale’ sign and waiting for buyers to make a too-good-to-be true offer. But there are strategies that can help you climb higher a little quicker.
One of the best aspects of being a home upgrader – or ‘second stepper’, is that you don’t have to work as hard to build decent deposit. If you chose you first home with care, you may have considerable equity in the property, and this can go a long way towards paying for your next place.
In addition, upgraders have an established borrowing record, something that can be a real asset when it comes to securing finance to fund your next home.
Minimise buying costs
That’s not to say upgrading to your next home is all beer and skittles. It can also come with some hefty costs – in particular stamp duty.
Government figures show the average Australian moves about every five years. That can mean paying a lot of stamp duty over the course of your adult life. For second steppers, who received the First Home Owner Grant on their first property, the full cost of duty can come as a shock.
One way to minimise this cost is by exploring schemes that could see you entitled to a financial helping hand from your state/territory government. If you buy or build a new home in NSW for instance, you may be entitled to the New Home Grant Scheme. It provides a grant of $5,000 towards the purchase of new homes, homes off the plan and vacant land on which a new home will be built. The value of the new home must not exceed $650,000 and the value of vacant land must not exceed $450,000.
Your Mortgage Choice broker can explain any government initiatives you may be able to tap into.
Stalk the market for good buys
Another way to get more bang for your buck when climbing the property ladder is by stalking up-and-coming areas for a bargain. Choose your dream location, and if you can’t afford local prices, think about buying on its outskirts or in neighbouring suburbs. It’s a fair bet that higher prices will ripple outwards over time, pushing up values in adjoining suburbs.
Jumping from the first to the second rung of the property ladder can also be more affordable if you’re prepared to bring a dated home back to life. We’re not talking a major top-to-toe renovation - more of a freshen up.
Properties whose daggy décor may be turning buyers away can represent good value. A kitchen or bathroom revamp, a garden tidy up and a decent paint job can be easy ways to add grow equity once you’ve taken ownership of the place.
An opportunity to review your home loan
The sun may be shining on upgraders right now as the property market remains healthy and interest rates are at historic lows. Nonetheless, selecting the right home loan is critical, and climbing the property ladder offers an ideal opportunity to review your home loan.
Features like an offset account, are often especially useful for second and subsequent home owners, who may have a little more cash to hold in the linked account than, say, a first home buyer. An offset can play a vital role in helping you pay off the loan sooner and save on interest charges – yet still with your money available at call.
Importantly, talk to your local Mortgage Choice broker about how your current loan compares to what else is available on the market.Upgrading can provide opportunities to refinance your loan, so that your new home and lifestyle is also accompanied by the fresh – and potentially money-saving –