Are your weekends spent shuttling between open homes and liaising with real estate agents as you search for your ideal first home?
Congratulations – it’s an exciting time! But it can also be daunting and overwhelming. So we’ve turned to the experts for advice on the common mistakes first homebuyers should aim to avoid in 2016:
1. Borrowing too much money
With house prices at record highs in some parts of Australia, would-be homeowners should be wise to “avoid borrowing too much for their first home,” says Taj Singh, director and co-founder of First Home Buyers Australia. “Future events such as interest rate rises or changes to your personal circumstances may affect your ability to meet your home loan repayments in the future,” he says.
2. Being over-confident
There are plenty of strategies you can use to try and negotiate a good deal, but it pays to “be confident, but not too cocky”, according to real estate agent Peggy Willcox from Ray White. “Remember that agents do this every day; we have seen every trick in the book, we have seen thousands of buyers come through houses and point out all the faults in the property hoping to get it cheaper,” she says. “Be strong but be genuine and don’t play games.”
3. Thinking short-term
Even when purchasing your own home, it’s important to understand that property is an investment. “It’s a long-term proposition that can underpin your wealth well into retirement”, says Greville Pabst, Chairman of WBP Property Group and judge on The Block. “You may want to consider whether it’s more strategic to rent where you want to live, and buy the best-performing property within your budget,” he adds.
4. Falling for low interest rates
“We’re in a low interest environment, meaning at some point interest rates are likely to go up. Could you afford to borrow the same amount if interest rates went up?” asks Peter Munckton, BOQ’s chief economist. “There are some great rates around, but keep the long-game in mind and remember there’s more to a loan than just the rate.”
5. Failing to face the facts
Nathan Birch, co-founder of BInvested, owns a staggering 200 properties – and says he’s been able to acquire so many assets because he checks his emotions at the door. “For those planning to buy their first home in 2016, I’d strongly recommend against letting emotion be your driving factor,” he says. “Getting emotionally attached to a property can cost you, big time. Look at the numbers and learn how to negotiate on the price, and accept that if it falls outside your budget, something else will come along.”
6. Not understanding the costs
“As well as your deposit you need to budget for legal fees, stamp duty, loan application fees, pre-purchase inspection reports and sometimes lenders mortgage,” says Shelley Horton, director of Sydney-based buyers agency Albion Avenue. “After you move in, as well as your mortgage you need to factor in council rates, gas, water, electricity, insurance and regular maintenance costs, too.”
7. Not being prepared to compromise
Remember: this is your first home, not your dream home. “You may not be able to get everything ticked off your wish list,” advises Amalain Advocate co-founders Michelle Amarant and Wendy Chamberlain. “Be flexible with location or the size of property if your budget doesn’t allow you to buy your dream home in your dream suburb, as you’ll probably find that the next suburb gives you better value for your money.”
8. Not getting insurance
Fire, flood, theft or storm: as a property owner, these are just some of the unexpected scenarios that can catch you off-guard. “Insurance will cover you if something major goes wrong with your property,” says Bessie Hassan, consumer advocate at finder.com.au. “As with any insurance cover make sure you read the fine print so you understand what’s protected and what’s not. The less you pay for cover, the less protection you normally have.”
“Don’t wait any longer!” suggests property stylist Jo Powell from 3 Pea’s Property Styling – stop waiting for the bubble to burst . If they have saved enough money for a deposit and to cover the associated purchase costs they should jump in now. Property will not get any less expensive – the time is now.
The information in this article is general information only and does not constitute financial or legal advice. This does not take into account your personal circumstances and accordingly you should seek independent financial and legal advice before taking any action, or refraining from taking any action in reliance on any information contained in this article.