Buying the wrong first home can be catastrophic! 7 Common mistakes that can turn your Aussie Dream into a nightmare…
Property prices in Melbourne may be high but many Australians are not giving up on their ‘Australian Dream’. A recent survey by the Commonwealth Bank found 75% of Australians under the age of 30 still believe that owning a property is the ultimate Aussie goal.
Buying your first home is one of the most important decisions you make in your life. Your first home is also one of the biggest financial commitments in your adult life. But it is also the start of a new and exciting chapter. That’s why you must make the right decisions when buying your first home.
The 7 Most Common Mistakes When Buying Your First Home
Finding your first home is not easy. If you rush into buying a property, you could easily make a mistake and purchase the wrong property. The mistake can have long term impact on your finances and your lifestyle.
Here are 7 Common Mistakes that first home buyers make:
1. Not getting a pre-approval on your home loan
Just finding out if a loan is available is not going to help you buy a property. Before you start looking at properties, go to the lenders and find out how much they are willing to lend you. That way, you will be able to budget accurately and can focus your mind on purchasing a property that is within your earning.
2. Not understanding your mortgage options
There are many home loan providers in the market. To find the best mortgage options you will need to research what is available. Most lenders prefer the buyer to produce a deposit on the property. Some loans do not require a deposit, but these usually come with expensive caveats.
3. Not understanding about associated costs
Buying your first home is more than just paying the deposit and mortgage. There is a range of expenses you will incur when purchasing a property including:
- Solicitor’s fees
- Land Tax
- Council fees
- Pre-purchase inspection fees
- House removal fees
- Professional Cleaning fees
- Renovation and home improvement costs
- New furniture costs
- New fittings expenses
4. Not investigating government grants
Government grants can help you save a substantial amount of money when buying your first home. Two grants that you can consider include the First Home Owner Grant (FHOG) and the HomeBuilder Scheme.
FHOG is an existing government grant that is available for all first home buyers. The grant provides $20,000 for home purchases in Regional Victoria and $10,000 for home purchases in Metropolitan Melbourne. Certain land tax exemptions also apply for eligible candidates.
The HomeBuilder Scheme is a new stimulus package introduced in June to help the construction industry. Eligible first home buyers are entitled to a $25,000 grant towards a new home, off the plan package or an existing home (provided they undertake significant renovation to the place).
To find out if you qualify for these grants, please visit www.treasury.gov.org
5. Borrowing more than you can afford
A common mistake made by many first home buyers is borrowing above their means. Over-borrowing can stretch your finances and will not allow you to make improvements to your property or to maintain a lifestyle.
The current pandemic crisis is unstable with more job losses predicted for the near future. You may want to consider all these factors when you are finalising your home loan. It is also prudent to investigate income-protection insurance when undertaking your first home loan in the pandemic.
6. Not getting involved
Buying your first home is a personal and rewarding experience. Only you will know what you are after so if you are intending to buy a first home, you must be prepared to commit to the process.
Once you have chosen the suburb you want to live in, spend some time researching about the suburbs and the property prices in these areas. The internet has a wealth of information and data you can access to learn about the property market in your preferred suburb.
If you are planning to buy at auction, take some time to attend a live auction first so you are familiar with the process. For more information about the auction process, please read Consumers Affairs Victoria’s website here.
On the other hand, some people become too emotionally involved in the first home buying process. Buying your first home is undoubtedly emotional but if you let your emotions control your better judgement you could end up with a bad investment.
The property is your first home and you will likely move again in the future. You have to make sure that the property you invest in now will have a good ROI in the future. If you have been looking for a while and have not been able to find the right property, consider taking a break from the process and return to it again at a later date. Taking some time off helps you regroup your thoughts and can prevent you from making a costly mistake.
7. Not getting an inspection report
If you are buying an existing home, an inspection report is important. Some older homes in Melbourne may require significant renovation and repairs. Many of these can only be identified by a trained building inspector. A pre-purchase inspection is a small investment to reduce the risk of buying a problematic property. When ordering your property inspection, always include a pest inspection to minimise the risk of termite.
Other things you will want to know as a first home buyer is covered in our blogs. Read our tips for ‘Buying your first home and what you need to know‘ article.
Looking for your first home in Melbourne? Consider moving away from expensive inner suburbs to the south-east. Keysborough is a hidden gem with good schools, great shopping and parks and green spaces. Contact me to see what’s for sale in Keysborough and other neighbourhood suburbs here.