Nowadays first-home buyers tend to be older (late twenties/early thirties), have existing debt, and have seen skyrocketing house prices. This trend may have eased off, but generally today’s first-home buyers are very different to their parents’ generation, when most people who took up a mortgage had its end in sight because they had entered the market at a younger age, and they were less likely to be burdened by other debt.
So, many first-home buyers are forced to think outside the square when it comes to making their purchase. Here are some ideas to consider:
Get rid of other debt
Before you take on the biggest debt of your life, by buying your first home, it’s a good idea to get rid of any other debt you have, such as a study loan, hire purchase or credit card debt. Mortgage interest rates are usually the lowest lending rate available, so it’s not good sense to be paying off other loans at a higher rate.
Saving for the deposit
If you’re serious about buying a home, then you’ll need to get serious about saving the deposit. Take a close look at your current budget to see exactly where your money is being spent. Define just how much you’re frittering away and have a serious think about what you can and can’t live without. This may result in a change in spending priorities and some major lifestyle changes.
Get help from the family
You may be able to borrow some of the money you need from your parents or other family members, or use some of the equity in their home to secure a loan. You may be able to offer them a rate higher than they would get with a term deposit, but lower than your mortgage rate.
Get a flatmate
This may be a good option in the short term (or longer term, depending on your circumstances), as it will generate extra cash to put towards your mortgage. For example, if you have a flatmate paying $100 a week, this gives you an additional $5,200 a year.
Home and income
Some properties available consist of a house with a ground floor flat, or a house split into two or more flats, or you may find a block of units. Many people don’t think this an option as they don’t like the idea of having to deal with tenants, or of living in a smaller home. The advantage is that your tenants pay a good chunk of your mortgage, and it might help you get into the market in an area that you may not otherwise be able to afford.
Take the long-term view
The property market is volatile; prices go up and down, but if you take a long-term view, you will most likely be making a very good investment. It doesn’t matter where in the cycle you enter the market – over time, the general trend is up. But do make sure you can pick your time and never be forced to buy or sell.