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Some of the more important issues include location, price, amenities, changing needs, reading the market, interest rates and should you buy new, renovated or unrenovated.
The most important thing to consider so far as location is concerned is proximity to employment. Many first home buyers have limited finances as they are in the early stages of a career or they may be trying to buy a property on a single income.
You need to consider transportation costs as well as mortgage repayments when budgeting to buy a home. For example, will living a long way from your job mean that you have to buy a second car? You need to consider the financial implications of this on your household budget.
The basic premise is to buy the best house you can afford. If you can afford it today, it will be even easier in the future as your income increases. This assumes that interest rates remain fairly stable (read the interest section to gain an insight into how you can take advantage of low interest rates into the future.).
The best way to calculate what you can afford is to approach your bank and find out what they can do for you. At the same time, get a second opinion by asking a mortgage broker to find you a good deal.
The most important amenities for a first home buyer, in order of importance are;
- Schools: If you already have children or are planning to have a family, proximity to schools is very important as this is a trip you will have to make over one thousand times. Ideally, you would like to be walking distance to the children’s school.
If you have teenage children, then living in the zone of a highly sought-after school is vital. People pay a premium to live in an area which allows their children to go to a school with a good reputation. If you are not planning on having children, consider proximity to transport.
Transport: As you will be going to work everyday, proximity to transport is important. To be only a short walk from the bus, tram, ferry or train station is not only convenient but a great selling point to highlight if you live in one of the major capital cities of Australia. If you are intending to drive to work everyday, proximity to transport may not be as important as living close to shops.
Shops: When I talk about living close to shops, I don’t just mean living the near the butcher or supermarket. Cafes and restaurants play a larger role in our lives today than they did 20 years ago. Being able to walk to King St, Newtown (Sydney), Lygon St, Carlton (Melbourne) or The Parade, Norwood (Adelaide) are big drawcards.
If you have found the perfect location and don’t intend to shift for a long time, consider whether you can accommodate the changes in life. Is there a room to extend, put in another bedroom, living area, bathroom? Is there car parking for more than one car? Is the yard large enough for your needs now and into the future? Is a unit sufficient or do we need to buy a house with some land?
Reading the market
An easy way to tell if it is a good time to buy is when it is a bad time sell. Last year was not a good time to sell and this year won’t be much better. Falling prices and a lack of confidence means that it is a great time to “bag a bargain” and take that first step on the housing ladder.
If you are currently looking for your first home now, congratulations, you are making one of the best moves you will ever make in your life. If you are not looking for your first home but are thinking about it, stop thinking and start looking! There has never been a better time to buy your first home. Cash grants may always be there but once in a lifetime low interest rates only come along once!
As mentioned earlier, interest rates are at historical lows, but they won’t always be this low. If you are a risk-averse person and want to be assured of your future mortgage repayments, then you might want to consider fixing your loan for 5, 10 or even 15 years. I am!
The five year rates are around 6.0 per cent, 10 year rates at well under 7.0 per cent. How about CBA package loan which has a 15-year fixed rate of 6.72 per cent! Remember, it was less than 12 months ago when the average variable interest rate was well over 9.0 per cent.
New, renovated or unrenovated
There is no right or wrong answer.
If you are looking to buy a new home, this generally means you will be buying a new house on the outskirts of the metropolitan area or a small apartment near the city. The positive aspect to buying a renovated home is it has all been done for you. The downside is that you will generally pay a premium for somebody else’s handy work.
An unrenovated property provides you with a great opportunity to add value in the short time but seriously consider how good your renovation skills are. Many a relationships have been strained by renovations that go over budget and more commonly, over time.