Housing affordability tips
Thursday, 02 February 2017 13:58
With property prices skyrocketing in certain parts of Australia, the likelihood of snagging a 3 bedroom home without cashing in a hefty inheritance or help from mum and dad, is getting slimmer and slimmer. But there are options available for first time property buyers.
Tip 1: Become a rentvestor
This could be a useful move for first home buyers looking at alternatives to owner-occupation. What many people decide when conducting their home loan calculations is to purchase real estate outside capital cities (or on the outer fringes), where housing can be more affordable. From there, they might rent in their preferred location. Colloquially dubbed 'rentvestors', this group has emerged in popularity over the last few years.
Tip 2: Consider an apartment
First home buyers often get caught up in the notion that their first property purchase needs to be their dream home. The reality is that many people will purchase more than one property in their lifetime and apartment living may be just the ticket for first time home buyers to get their foot in the door.
Tip 3: Buy to renovate in stages
There is a reason the term 'fixer-upper' exists, after all. Buying a less-snazzy home in a good or growing area at a bargain price could well be an excellent purchase choice, particularly if most of the issues are purely aesthetic ones that you can fix yourself. However, before doing this, it is even more important than usual to get a property inspection to make sure the damage is only surface deep.
Tip 4: Leverage government home buyer grants and concessions
Buying a home is a big step and it's easy to be daunted by the large sums of money involved. With careful research of state and local government grants and concessions, some first home buyers may be eligible for assistance provided that certain conditions are met, for instance new home owner grant recipients in NSW need to live in the home for a period of time, therefore these people can’t also be ‘rentvestors’ at the same time.
Tip 5: Interest only home loans
Fixed Interest mortgages with interest only repayments are becoming a ubiquitous form of loan. Basically, this type of mortgage allows you to make interest only payments over a set period of time, then converting to interest and principal repayments for the remainder of the loan term.
As such, your repayments are smaller for the interest only period, but would increase once the interest only period ends and principal is included in the loan repayment. You also would need to take into account the timing of fixed rate interest periods and their conversion into a variable interest rate.
Tip 6: Find someone to purchase with
Pooling of resources may be an option of last resort. This could potentially get you in the property market sooner; however, there may be some pitfalls with this option. Legal obligations and identifying the responsibilities of each person involved could put some strain on relationships. Research can’t hurt, and you’ll need to do a solid amount of work if you intend on pursuing this option – seeking professional advice is essential.
Growing up in Australia means many of us have all been conditioned to think we should be striving towards the Great Australian Dream of home ownership and a quarter acre block. However, it might just be time to reconsider as housing market prices skyrocket. Hopefully some of these tips may present some options to consider.
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