Buying A Home In Australia: How To Prepare Financially
Average home values across Australia's five capital cities increased by 10% between January to May in 2021. The average house price in Sydney alone is predicted to increase by an extra $216,000 this year alone, bringing the total cost up to $1.24 million by December. With home prices continually skyrocketing, Aussies looking to purchase property need to be smarter with their finances than ever. By doing your due diligence and putting together a well-planned property strategy, you’ll be in the best position to purchase an affordable home without getting in over your head financially.
Set a budget
Before you even start looking at properties, setting a clear, and well-considered budget should be your first step. A budget doesn’t just help you save up more money; it also offers the crucial benefit of clarifying exactly how much money you have to put towards: your savings account, property deposit, paying off debt, future mortgage payments, and investing into other areas. To set a budget, start by looking at the money you have coming in against your total expenses and calculate money leftover. Although you may adjust your budget and savings strategy as time goes on, this functions as a helpful starting point.
Know how much you need in savings
It’s also important to know how much you’ll need in savings to purchase a home. Saving money can be challenging in the best of times, but being clear on your numbers will help motivate you to reach your goal. So, take time to research and understand all associated costs — for example, mortgage application fees, legal fees, pre-purchase building and pest inspection fees, stamp duty, and title searches. Take these costs and add them up together with the cost of your property deposit. The resulting figure is your home purchase savings goal. With this number in mind along with your current savings rate, you can then determine how long it’ll take you to afford your ideal property purchase.
Be careful with home loans
Home loans are undoubtedly expensive — the average mortgage in Australia is $500,000. Make sure you’re not paying anymore than you need for your home loan by proactively avoiding common and expensive home loan errors. For example, look for a loan with minimal or zero fees. Lenders typically charge a myriad of costly fees such as maintenance fees, account fees, overdraft fees, application fees, and even early exit fees. Ultimately, these fees make it harder for you to reach your financial goals. It’s also important to avoid gimmicks that sound like good deals, but actually force you to pay more in the long run. Honeymoon rates, for example, can save you interest for the first few years before leaving you locked in with a rate that’s more expensive than others on the market.
Buying a home in Australia is an expensive endeavour. By setting a budget, working out how much savings you’ll need, and avoiding costly mortgage mistakes, you’ll be on the right track to purchasing your ideal property.
Daily Bulletin
