Regardless of your stage of life, buying a home is a big financial decision.
According to the Australian Bureau of Statistics (ABS) 36 per cent of Australian home owners have a mortgage. Matching a home loan to your stage of life is no simple feat… rates are just one of many key factors to consider.
First Home Buyer
You might have an idea of how much you need to spend to get the property you want, but do you know how much you can borrow in the first place? To estimate your borrowing capacity accurately, you will need to consider what your total costs will be, the size of deposit you can afford and how much you can comfortably repay.
How much a financier is prepared to offer based on your current income can vary from lender to lender. BOQ, for instance, takes into account income, your career trajectory, expenses, debts and possible interest rate increases. Other lenders might just look at one aspect.
The location of your first home is important, but it is also worth remembering that your initial home is your first step on the property ladder
Understand the property and area
The location of your first home is important, but it is also worth remembering that your initial home is your first step on the property ladder, which can provide you with financial opportunities in the future.
It’s a good idea to investigate the local community you’re considering buying into. Check out schools and other amenities the local area has on offer, plus what’s on the drawing board over the coming decades, for example upgrades to infrastructure.
Visit the property more than once and at different times of the day and days of the week so you get the full picture.
Look out for hidden expenses
It’s important to consider hidden expenses that might appear once you have bought your property. Things to look into thoroughly include roof leaks, substantial cracks, leaking pipes, drainage issues, roof damage, floor damage and asbestos.
Forecast capital growth
Don’t be afraid to look at capital growth forecasts and rental yields. Consult industry research firms that specialise in quantitative analysis as this will assist you in understanding the key drivers for your chosen location.
Don’t forget that one day you may want to sell this property and if it has outperformed other areas in growth due to better amenities and location, then this can significantly increase your overall financial return.
Your Growing Family
As your life changes, you’re likely to need different things from your home and moving to a bigger property might be on your agenda. However, it’s worth considering what you can do with renovations to fulfil your needs. Moving might make sense if you want to experience a new area or if planning restrictions are limiting your renovation aspirations.
Renovate if you can
If you decide to stay in your home and make renovations, there are plenty of aspects you can update to add value including, timeless designs; extending out as a cheaper alternative to extending up; and adding features such as swimming pools.
Consider the costs of moving
Be conscious of the costs associated with moving and relocating, such as state stamp duties, real estate agent fees and marketing your property for sale.
Many owners put off moving due to these high associated costs and would rather renovate their property to get the home exactly as they want it. This allows them to remain in their local neighbourhood.
Empty Nester
You might be at the stage where you have significant savings and a higher income to invest in an additional property. Before you start looking, make sure you know what you want to achieve.
Are you seeking capital gains from a make-over and re-sell, or would you like a steady income from rent? Your objectives will influence the kind of property you look for and where, and affect your budget and financial structure.
Think about size and accessibility
If your children have moved out of home, and you don’t need the space you once did, downsizing offers an opportunity to free-up some of your assets. It can also give you a more manageable home in your retirement.
Even if accessibility is not currently an issue, don’t forget to consider accessibility when looking for a new home. Look out for a property that doesn’t have stairs or, if it’s an apartment, that has elevator access. By thinking ahead of time, you will be prepared.
As the ageing population expands over the coming decades and life expectancies increase, we expect to see many older Australians requiring homes with
improved accessibility.
Refinance your home loan
Refinancing is not only for buying an investment property or to help fund renovations. It can provide a great opportunity to negotiate a better deal on interest rates and fees. Or, if your circumstances have changed, it may be an opportunity to find a new home loan to better suit your current requirements.
ABS data supports this increasingly popular option, with nearly 21,000 Australian mortgages refinanced in December last year, the highest level reached since 2010. Don’t forget to consider exit fees, application fees and stamp duty when refinancing.
Find the Right Mix
Things change. Time moves on. Your circumstances are unique and interest rates should be just one of the factors considered when searching for the right mix of features and benefits of a mortgage. If you match a home loan to your lifestyle and goals, it stops being just a mortgage, and becomes part of your long-term plan.
Peter McGuire is chief market strategist with real estate business NG Farah.
Trevor Robertson is head of residential products and third party relationships at BOQ Specialist.
The credit provider is BOQ Specialist – a division of Bank of Queensland Limited ABN 32 009 656 740 AFSL and Australian Credit Licence no. 244616 (BOQ Specialist). Terms and conditions, fees and charges and lending and eligibility criteria apply. We reserve the right to cease offering these products at any time without notice. BOQ Specialist is not offering financial, tax or legal advice. You should obtain independent financial, tax and legal advice as appropriate.
The information contained in this article (“Information”) is general in nature and has been provided in good faith, without taking into account your personal circumstances. While all reasonable care has been taken to ensure that the information is accurate and opinions fair and reasonable, no warranties in this regard are provided. We recommend that you obtain independent financial and tax advice before making any decisions.
