You’ve saved up a healthy-sized deposit and are about to make the most exciting purchase in your life. Congratulations! But buying your first home can also be an overwhelming experience … particularly when it comes to finance.
To help, here are three finance traps you should steer clear of as a first home buyer.
1. House hunting without a pre-approval in place
As tempting as it is, don’t start shopping without getting a pre-approval for your home loan first – as that can lead to heartbreak.
For example, you might fall in love with a property, only to discover too late it’s over your budget. Or miss out on your dream property when someone else snaps it up while you’re trying to sort out the finance.
A pre-approval from a lender can help you avoid this disappointment. It gives you a good idea of how much you can borrow, so you only look at homes you can afford, and also makes the subsequent loan application process faster.
2. Overstretching your budget
Just because you can borrow an eye-watering large sum of money, it doesn’t mean you should. Stretching your finances to the limit is never a good idea. You won’t have a buffer should your circumstances change or interest rates rise. A good way of avoiding this trap is to speak with a good broker. They can look at your income and outgoings and help you work out what you can realistically afford to borrow.
3. Forgetting the hidden costs of buying property
Buying a home comes with some big bills attached, even beyond the purchase price. You need to have enough money left over to pay for conveyancing fees, building and pest inspections and, potentially, lender’s mortgage insurance (if you don’t have a 20% deposit).
Once you’ve bought the property, there will be moving costs, utility bills, council rates and strata fees (for apartments) to consider, as well as ongoing repairs and maintenance.
You want to have enough room in your budget to pay for all these associated costs. So do some research and add up all your likely expenses, so you’re confident you’ll have enough money left over.