The world of property can be a daunting place. Investing in property can be a volatile and risky business, especially with the current uncertain housing market. You certainly wouldn’t want to go running into it blindfolded.
In particular, first time property buyers are susceptible to falling into various traps when it comes to real estate. With lists of things to remember as long as your arm, it can be easy to slip up. Sometimes, this can even make it hard to get things going when it comes to securing a future for yourself and your family.
We’ve got to remember though that it’s not all so downbeat. Real estate isn’t a black and white world, it’s a vibrant market here in Australia. Using a financial advisor can be a great way to get professional hints and tips on the property market. It’s important however, that you seek the right advice and ask the right questions. Take a look at the following list to find out what you need to know.
Can I afford to buy this property?
It might seem obvious, but hear us out. Anyone living on low income is clearly not going to be buying up a mansion in the high-end suburbs right? We’ve all got a reasonable idea of what we can afford. It’s still a solid question to start with though, helping you to get clear in your mind what you might be able to afford.
Property is expensive, to state the obvious again. When you’re looking at properties it’s important to remember that we’re talking about real money. It’s easy to get carried away with “just another 50k” and before you know it, you’re going to be way out of your financial depth.
This can be a crucial error for many first-time buyers, but it’s one that having a financial advisor can assist in avoiding. Having that extra set of eyes to look over your finances can be a big blessing, making sure you get the best out of your money whilst avoiding the worst case scenarios. It also helps to bestow a sense of perspective on a potential purchase.
Which mortgage is the best one for me?
There are a whole plethora of loans out there for all types of different situations, but let’s not forget that a mortgage is still a loan. As a result, choosing the right one is paramount. Take time to consider both fixed and variable rate loans, as they’re very different.
A sizeable amount of first time buyers love the idea of variable rate loans, simply because they give the option of potentially greater repayments. They also tend to have a lower interest rate compared to their fixed-rate opponents, but that can change very quickly if the banks decided to up their rates. This can make for a risky lend so be prepared for that potential spike.
Fixed rate mortgages are locked into a certain rate for a longer period. It’ll definitely be easier to budget for a fixed rate loan and repayments will stay the same no matter what. The downside is that if the interest rates drop, you might be left feeling a little sore that you’re paying out a higher rate. On the other hand, if the rates go up you’ll be happy as anything.
With interest rates the gamble is all about offsetting the risk with the reward. When rates are at a real low like they are now, it’s quite tricky to ignore the pull of a fixed rate loan. This isn’t set in stone however, so listen to that financial advisor’s hints at the time of borrowing.
Do I need to get loan insurance?
Whilst interest rates are at an all-time low, it’s far less intimidating to sign up for a larger loan. The knock-on effect is that people can get much larger mortgages with far less of a deposit to secure against. That’s fine as long as you can afford the repayments in the long term, but it can make you ask the question about loan insurance.
Normally, lenders tend to be quite cautious. If they lend you a mortgage, they’re working on the sound financial evidence that you’ll be able to pay that back.
In plain terms, you’re an investment which they want to protect. If you’ve gone in with a large deposit then you most likely won’t need to worry about insurance, but those with smaller deposits may require insurance. The insurance will be on the rest of the loan and insurance premiums will only add to your level of monthly repayments. So in essence you can cost yourself more than the value of the mortgage by getting loan insurance.
Lenders will generally tell you whether you need insurance or not, but since they have an interest in the transaction, it’s best to gain a third party opinion from your financial advisor. You advisor should be able to tell you in simple terms whether your premiums will affect the amount you can repay to the lender, as well as give advice on possible ways to avoid the loan insurance entirely.
Am I rushing the decision?
Financial planners handle these situations every day, so they should be quite calm and collected in the advice they give you. Buying a property can be highly stressful when you start to think about those big lumps of seemingly imaginary money flying about.
If you keep this in mind, an experienced financial advisor will be able to identify when someone isn’t exercising good sense. They will then (hopefully) act accordingly, rather than let you get into 100k more debt than planned. Remember that the advisor is there to support you 100% of the way.
It’s impossible for anyone to predict what will happen tomorrow – even a financial advisor. What they can offer though is a better position than most, when it comes to the fluctuations and nuances of your local property market.
This is important as it’s in a bit of a state of flux right now. Never forget that the housing market will never stay on an upward trend forever. At some point it will come down – how much, nobody can predict. Your financial advisor will however, have a keen eye for how the market works and should be able to give some solid advice as to whether you should buy at that very moment.