At the beginning of 2020, the average price of a property in Australia is over $250,000, significantly more if you’re hoping to purchase in Sydney.
This can make it seem like getting on the property ladder is an impossible dream. The good news is that it’s not, the bad news is that the average age of a first-time buyer is 31-33.
Most first time buyers are couples that have the added advantage of two incomes.
The reason is obvious, even with just a 10% deposit, you’re going to need $25,000 to get started, and you may need as much as a 20% deposit, ($50,000).
In other words, to get your first mortgage you’re going to need a plan of attack.
Fortunately, the following 5 tips will help to ensure you can purchase your first step on the ladder, opening up an array of future possibilities.
The first thing you have to consider is whether you’re going to be eligible for a mortgage. Lenders have strict conditions that must be met, the exact conditions will vary from lender to lender.
But, before you start planning anything it’s worth checking that you’ll be accepted.
The easiest way to do this is to contact a mortgage broker. They should know the market and be able to identify potential lending sources for you.
Of course, you’ll need to be completely honest with them, particularly regarding current financial commitments.
A mortgage broker can get you a decision in principle.
This is an indication of how much you could borrow and that you will be approved. It is subject to verification, the details you provide must be true.
But, it will confirm that you’re eligible and give you a rough guide for how much you can borrow.
This will also confirm the amount you’ll need as a deposit to qualify for the mortgage.
Don’t forget the amount they offer you will be 80-90% of the value of the house, you’ll need to have the rest of the money available before the transaction can be finalized.
Knowing your deposit requirements means you need to start saving.
However, before you can save you need to focus on clearing all the debts you have.
Doing this has the potential to increase the amount of the mortgage you’ll be offered.
It will also improve your credit rating helping you to get the most attractive interest rates.
Perhaps even more important is the fact it will be a real benefit after you’ve bought the home. Having cleared your debts you’ll find it a little easier to pay the mortgage during the tougher times.
Create a plan to tackle your debts, start with the smallest and work upward, simply because this gives you a confidence boost as you feel like you’re getting somewhere.
Deposit / Savings
Alongside clearing debt you need to start considering how you’re going to get the $25,000-$50,000 you need for a deposit.
The first step is to put all your savings into a good high-interest savings account.
Add more regularly and compound interest will help the account to grow much faster.
This is also a good time to create a budget, listing all your income and expenditures will allow you to make savings where you can and increase the amount going into your savings account.
Budgeting will also help you to be prepared for homeownership, you’ll need to have the funds available for all bills, emergency repairs, maintenance, and even desirable upgrades!
Check Your Bank Accounts
All your bank accounts must be in order, late payment fees, overdrafts, even tax issues can all affect your ability to obtain credit.
Bad bank accounts won’t just lower your mortgage borrowing capability, it can destroy your ability to borrow.
That’s why it’s essential that you monitor them closely and make sure the accounts for at least 3-6 months before you put your mortgage application in.
The final stage is to assess what properties are available.
You’ve already spoken with a mortgage broker who’s indicated what you’ll be able to borrow.
You can re-approach the broker when you’re ready to apply.
But, as part of the preparation process, you should take a look at what properties are currently on the market within your intended price range.
You may find that you don’t want to buy until you can afford something more.
Or, you may need to prepare yourself for extensive refurbishment.
Either is possible but it helps to know what you want before you apply for a mortgage.