Buying your first house is the start of a new and exciting chapter and is a defining moment in your life. It is also an expensive process and at times it can feel overwhelming. Decisions are made quickly and it’s likely to be the single biggest investment you’ll have made to date.
The language used and ways of working in the house buying process can seem confusing and it’s difficult to know who to trust when it’s your first time around.
Find below a list of the costliest mistakes made by first time buyers, to help you steer clear of digging deeper into your finances:
1. Borrowing beyond your means
House prices rise sometimes very quickly. Over the final three months of 2016 the average house price in Australia rose by $25,400 to $656,800. For first time buyers, this can be daunting and, if your finances don’t match up, you may find it near impossible to enter the market.
It can be tempting to increase your borrowing in the face of dramatic increases in house prices. First Home Buyers Australia reported that during 2016 the average home loan size in Australia increased by 0.6 per cent. When you look at the figures by state the scale of borrowing becomes even more evident:
- The average size of NSW first home buyer loans grew by 4 per cent to $365,900,
- VIC decreased by 1.7 per cent to$315,100,
- QLD grew by 2.6 per cent to $305,500,
- WA grey by 1.1 per cent to $321,100.
- Tasmania plummeted by 15.8 per cent to $216,900; and
- The ACT average first home loan size decreased by 4.5 per cent.
Whilst it may be tempting to borrow more it is important not to overextend your finances. Your initial borrowing turns into mortgage repayments and failure to meet your mortgage demands comes with serious consequences not to mention added stress.
Buying at the edge of your means leaves you far more vulnerable to unexpected costs and changes in the market. In short, it’s not worth it.
2. Skipping the inspections
We’ve all heard the saying ‘Never judge a book by its front cover’, the same goes for houses. Clean and crisp interiors and an attractive garden could be masking serious and fundamental problems with the property. Only experts are qualified to assess these problems and building and pest inspections are an essential part of the process.
Buying a house is a big decision and a huge investment. Make sure you treat the decision with the gravity it deserves by mitigating all possible risks. A building inspection highlights any issues before you buy and may pick up serious problems which need to be resolved imminently.
A pest inspection report will give you an idea of whether the property has any costly pest problems to resolve. These inspections are indispensable tools for any property buyer, don’t skimp on this part. The reports could cost around $300 to $1,000, but in the long run they may save you thousands. It’s worth it.
3. Not shopping around
Your first house viewings are exciting and it’s difficult not to get carried away by letting your heart rule your head.
You’re looking for the property you love, the one in which you’ll make memories in for months and years to come. In the early days, when you feel like saying ‘yes’ to the first property you come across remember that you may be missing out on the one you’ll absolutely love by not shopping around.
To guide your search and ensure you’re viewing properties that suit your needs make the most of resources like Pricefinder and Residex. These resources help you to find neighbourhoods that might fit your price range, and talk to a local real estate agent you trust to further guide your search.
4. Going it alone
Don’t underestimate the power and helpful support of mortgage brokers and real estate agents. For most people buying a house is something they will only do a few times in their lifetime. Therefore, it’s a difficult process to become accustomed to.
Being independent and self-sufficient, as most young Australians are, is a good thing and is probably one of the many reasons you find yourself entering the housing market.
However, it is important to seek specialist help on your house buying journey. It’s a big decision and investment so treat it like one.
A First Home Buyers Australia survey found that the most helpful services available to first time buyers are mortgage brokers (38% of votes) and real estate agents (25% of votes). Don’t overlook those who can help with this momentous decision, it could cost you in the future.
5. Overlooking grants
State first home owners grants exist to support first time buyers to enter the market, it may sound too good to be true but it’s not. However, first home buyers often overlook these grants and instead rely on their own savings. Don’t make this costly mistake.
To access grants, contact your local authority. The following are the grant amounts by state:
- NSW: new builds only, up to $10,000.
- VIC: new builds only, between $10,000 and $20,000.
- QLD: new builds only, up to $20,000 until June 31 and $15,000 afterwards.
- WA: new builds and substantially renovated homes, up to $10,000.
- SA: new builds only, up to $15,000.
- TAS: new builds only, up to $20,000 until June 31 and $10,000 afterwards.
To improve your chances of receiving a grant apply early and make sure you have all the necessary documentation.
By avoiding the common mistakes outlined here, and seeking help where you need it, there’s absolutely no reason why your next chapter in your first home can’t be a step towards a new adventure.