If becoming a first-time homebuyer is more about owning an investment property instead of living in your new home, then the best time to plan is when you are still staying with your parents. Here’s how to ensure you can achieve your financial goals by the time you are ready to buy a property.
Have a sensible budget
Review your earnings and fixed expenses. Once you’ve decided what you want, create a realistic savings budget. To help you work towards your goals, speak to a mortgage broker about the type of loan you could afford to take on based on your earnings.
It’s also a good idea to only view properties that do not exceed that price range. For eager house buyers who can’t wait to make the jump to homeownership, choosing a property that is less than your loaning power is the best bet. By aiming at a lower price range, you can save for the required deposit in a shorter time. However, this means you would need to settle for a property in a less central location. For example, mortgage brokers in Melbourne can help point you to suitable properties based on your initial budget.
If you’re fortunate enough to be able to live in a house at no cost, many lending institutions will add a tiny amount of rent on your application. If they add up your income and expenses and expenses, they’ll include hundreds of dollars per month as cost of renting a home – even though the fact that your parents have not charged you one cent. The exact amount used in the calculation of the lender will be determined by the lender.
Get a thorough assessment
Engaging a professional mortgage broker to provide you an initial assessment will give you an idea of how much you are able to borrow and how much you’ll must repay. Mortgage brokers are able to establish good relationships with various lenders, they can gain be able to access special offers that are specific to your specific circumstances like deals offered to specific industries or loans specifically targeted at people who have had issues related to their credit cards.
See it as a stepping stone
You might be eager to move in immediately once you own your own house. This is why putting a stopper on this idea could be a bit difficult for some. At present, consider the benefits of owning an investment property, while being at the home of your family. You can, for instance, make a profit or increase equity without having to bear excessive outgoing expenses. With a sound and long-lasting property, you may contemplate purchasing a better property that will meet the needs of your family at the time.
Renting can be a good temporary option
For potential homebuyers who don’t have the opportunity to live together with their family at home, renting while crafting a financial property portfolio is another strategy that works. Again, by consulting a certified home loan broker, you can be given an accurate overview of your financial ranking, the type of deposit needed, and whether the properties are priced accordingly so that it matches your borrowing power.
To help you decide whether your first home purchase should be one you stay in or one you invest in, take a look at these pros and cons:
Pros of buying a first home to live in
- Access to grants and concessions. Depending on whether you meet the criteria or not, you may be able to gain access to substantial grants that will help boost your deposit. You may also be able to gain from land tax concessions.
- Owning your own home means that you’re free to have the home lifestyle you want. You can decorate any way you want, and you don’t need anybody’s permission for repair works or enhancements. You are also free to get a buy the pet you’ve always wanted without asking for permission beforehand.
- Owning your own home offers security. If you rent in someone else’s property, how long you are allowed to stay depends on your landlord – and the lease they give you.
- Exemption from capital gains tax. When you upgrade and sell your primary place of residence, you don’t have to pay capital gains tax – something you can’t avoid if selling an investment property.
Cons of buying a home you live in
- Fewer opportunities for tax exemptions. Although owning your own home enables you to avoid capital gains tax, property investors have more potential to access tax exemptions and deductions related to upgrades to your property.
- Zero income possibility. Unless you decide to rent out some part of the property, owning a home you live in will only bring you cash on the day you sell it (and, depending on the price you get versus your debt, that isn’t guaranteed!).
- Where you can afford to live the dream lifestyle may not offer the best capital growth. Sometimes, buying a property at a cheaper cost in a good location can produce a far better long-term profit.
Buying your first property is a huge step and also a complicated one. Therefore, it is essential to seek the advice of credible financial experts, like accountants, mortgage brokers, or even financial planners, to help you make appropriate choices based on your financial goals and budget. As a young investor, you would also need to be fully prepared for potential pitfalls. By educating yourself with the right information, you are better equipped to make well-informed decisions when it comes to buying your first property. If you are thinking of investing in a property, it’s worthwhile to engage the best home loan brokers in Melbourne from trusted and certified financial institutions.