From Darwin to Dubbo, Brisbane to Broome, Australia has one of the highest levels of home ownership in the world. In spite of the recent surge in prices in every capital city, that great Aussie dream of owning your own patch of paradise is still what most of us aspire to. But if you’re smart and do some planning, there are clever ways to make buying your own home a little easier to do. Here are seven good tips to help you get the front door key faster.
1. Don’t be swayed by fabulous furniture and fresh flowers.
Many home sellers now use professional stylists to ensure their property looks the best at open for inspections. But look beyond the designer cushions and fresh flowers. Be practical. Do a pest and building inspection and check for major structural damage or signs of rot. And, don’t forget to ask yourself all those mundane questions – such as is there enough cupboard space in the kitchen or will your sofa fit through the front door?
2. Location first, property second.
Your first property may not be your dream home, but it can be a vital springboard towards that long term goal. The trick is to buy in a location where property values are growing at the same rate as the location you ultimately want to live in. This means compromising on the size or style of property. Buying a town house or a unit instead of a house, or a one bedroom instead of a two bedroom place.The important thing is that you'll have a foothold in your dream location. When you've accumulated more equity through capital growth, you'll be able to trade up to your dream home, too.
3. Small apartment blocks versus large.
The glamour of a big modern apartment block with outdoor pool, gym and on-site caretaker can certainly win over buyers. But here comes the crunch. You pay expensive body corporate fees every quarter and ongoing maintenance charges. Smaller blocks are usually older with fewer (if any) facilities, cost less to run and are often better maintained because of a higher level of owners versus renters. If you’re in the market for an apartment and see several places for the sale in the same block, chances are the fees are the reason why. Beware.
4. Save valuable time. Search online for the best loan
When it comes to finding a loan, it pays to do your homework. There’s a minefield of possibilities, offers, types of loans, variable and fixed rates. Compare what’s on offer with different banks (not just the big 4), mortgage brokers and boutique lenders. Some places may offer only one or two loan types, but lenders such as HSBC Australia have no less than 9 different loans to suit everyone’s lifestyle. Well worth checking out.
5. Don’t forget about fees – keep funds aside
Okay. You’ve been saving hard for a deposit and your loan has been approved. When you take the plunge a sign a contract of sale, there are all sorts of little (and not-so-little extras) added on. These include stamp duty, legal costs, disbursements, mortgage insurance, pest inspection report, survey report, builder's report, loan application fee, valuation fee, registration fee and so on.
6. Another secret. Ask about “professional package” discounts
Banks are a lot more competitive nowadays and actively reward customer loyalty. If you're earning a reasonably good salary, say more than $50,000 a year, or $80,000 or more with a partner, ask about the "professional packages". The home loan interest rate you are offered is usually discounted by 0.5 per cent, which can really help. If you have a strong relationship with one lender and consolidate all your business with them, you can qualify for more discounts, savings account fee waivers and credit card annual fee waivers.
7. Forget that daily latte. Extra payments can reduce your interest faster
If you gave up buying your morning latte on the way to work, you can save over $700 a year! Put it towards your loan. Making extra repayments is one of the best ways to reduce the total interest paid and term of your loan. Some people even try making payments every fortnight – great if it works for you and your budget.
As a rule of thumb, every $1 in extra repayments you make early in the life of your loan saves around $2 in interest over the term of the loan, depending on the level of interest rates.
If you have spare cash from selling your car or a garage sale, think about making a one-off lump sum payment. Check first that your loan allows you to make additional repayments without a penalty.
Happy house hunting!
Cathy Howley is Creative Manager and Copywriter at Options Strategy, Melbourne. The digital agency with the strategy edge. If you're in the market for a home loan in Australia, make sure you visit HSBC Australia
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