The cost of purchasing a home in Australia (and most parts of the world) is on the rise. In the last 10 years, prices have increased in almost every major Australian city. Indeed, becoming a homeowner entails a huge financial responsibility, requiring more than the ability to pay a down payment. Therefore, how do you go about saving and going for the Australian dream of home ownership?
The first consideration is to know where and how you want to live. The more you can specify what you want, the better. Ask yourself this question:
- Do I prefer to live in a rural or urban setting/community?
- Do I want a standalone house, or would I be alright with neighbours in the same building?
- Do I care how long my commute will be?
- Do I want to drive, walk to my destination, or ride the train?
The next steps are to figure out just how much you can afford according to your income, current expenses and goals. Take note that just because you can finance a bigger home doesn’t mean you should or need it. Remember that more space can mean higher real estate taxes.
To truly afford a house, you need more than just a down payment. Ultimately, you’ll want to be able to comfortably cover six factors: the down payment, closing costs, moving expenses, repairs and maintenance, the first few months’ mortgage payments and your emergency fund.
Let’s break down what that entails:
Down payment ranges from 5 percent to 20 percent of the total cost of a home, based on your credit score, mortgage interest rate as well as present financial situation. The most recommended down payment is 20 percent of the total property cost, which gives you an instantly bigger stake on the property.
Closing costs include property taxes, inspection fees, as well as prepaid interests, which generally costs around 2-5 percent of the total property cost.
Moving expenses shouldn’t be put out of the equation because the cost can be big as well. More than physically getting your stuff, more expenses can crop up. Will you require new furniture to fill a bigger place? Do you need to decorate when you move in?
Mortgage payments are a big factor to consider as you look into home ownership. Can you comfortably keep up with your mortgage in the first few months of the purchase? Many lenders ask for additional cash reserves to be secured that you can make repayments.
Repairs and maintenance are necessary because chances are, your home won’t be perfect on the day you move-in. Whether it’s painting your room or adding a fence, you’ll want to have cash ready for upgrades, repairs, and maintenance.
If you’re looking to buy a house because it’s a good investment, or that you need the bigger space for your family or want to be nearer your work or places you find crucial in your daily life, then you’re making a sound choice.
Remember to look for the cheapest home loan offered by the top and trusted home loan providers. Before making any decision, always do ample research and take into consideration your current situation and what will work best for your family.