Much like graduating from university, starting a business or even retiring, buying your first home will be a defining moment of your life. It’s the start of a new and exciting future; whether that be with family or a bachelor lifestyle.
To get the most out of the experience, you’ll want to make sure that your first steps into the great unknown of real estate, are positive ones; not steps fraught with mistakes.
Unfortunately, there are quite a few potential pitfalls out there, so we’re going to cover the top five most costly mistakes that first time buyer often make.
1. Overextending your finances
Between October and December 2016, the average house prices across Australia rose by around $25,400. The average price per house sat at around $656,800. This is fantastic news for those who are scaling the property ladder – but sadly not so good for those who are yet to put a foot on the first rung.
As a result of this price increase, people are borrowing more to cover the extra cash needed. During 2016, the average amount borrowed by Australians, rose by around 0.6% – yet the state by state changes were much more obvious:
The average size of a New South Wales first time buyer loan grew by around 4% to $365,900.
In Victoria, it decreased by 1.7% to approximately $315,100.
The first time buyer loan increased in Queensland by 2.6%, causing the total figure to sit around $305,500.
Loans in Western Australia grew by 1.1% to $321,100, whilst Tasmania decreased sharply by a whopping 15.8%. This left the region’s average loan amount to sit firmly at $216,900.
2. Skipping important inspections
It is super important to schedule building and pest inspections. They are an essential part of the buying process, as they can reveal a lot about the kind of property you’re interested in.
Never be as naïve as to adopt the “it’ll be alright” attitude, as this may end up costing you thousands. The gravitas of this decision means that you won’t be taking any risks at all, and that you will have covered all bases when it comes to making a final decision about a property.
Building inspections give an expert insight into the structural integrity of the property. This gives you a valuable position to think about before making a decision to buy. Pest inspections are similar, but can also give you tips on how to manage any potential future issues.
These reports are important, and so well worth the $300-$1000 price tags that often come with them. If they alert you to any issues, it can save you having to fork out 100 times that amount to prevent them.
3. Not being a happy shopper
With the market being as crazy as it is right now, you’d be a fool to not shop around. If you choose the first property that you lay eyes on, you might miss out on one that you absolutely love.
Don’t be emotional here, aa emotional buys are nearly always wrong buys. Just because your partner can envisage you sleeping in the master bedroom or mowing the lawn together, doesn’t mean it is right.
Use online resources and phone apps to keep in mind all the properties in the area, especially those that might fit your price range. Don’t forget to talk to your local agent too.
4. Going it alone
Mortgage broker and estate agents are among the most helpful services you will find in the industry.
I understand that when you’re young, you’ve got a sense of independence and a fierce desire to carve your own path. But that doesn’t mean you should go it alone during the first time buy process.
Make sure you get a mortgage broker and an estate agent on board, as their knowledge of the industry and the local housing market will be invaluable to your success.
5. Ignoring/forgetting the grant system
We all love freebies right? How about free money? No there is no catch – some states offer grants to first time buyers. For some reason though, many first time buyers do not look into this source of finance – instead relying on their own savings.
Here is a breakdown of the kind of grant money you can get in each state:
NSW = new builds up to $10,000.
VIC = new builds can net you between $10,000 and $20,000.
QLD = new builds only up to $20,000 until June 31st and $15,000 afterwards.
WA = new builds and renovated homes up to $10,000.
SA = new builds up to $15,000.
TAS = new builds only up to $20,000 until June 31st and $10,000 thereafter.
If you can manage to avoid making the above five mistakes, you’ll find that the journey of first time buying will be a much more positive (and lucrative) experience.