Servicing: the lender takes your income and living expenses, and determines the maximum mortgage repayments you can make. In the past, you could often estimate your household expenses – now, lenders want evidence of your spending patterns. So, you need to get serious about sticking to your budget, well ahead of applying for a loan.
Credit: first home buyers should beware of saving for a deposit while also using credit cards. Those cards count against your serviceability (the limit, not the balance) and missed payments can affect credit scores. In the lead-up to your application, pay off debt, reduce your credit limit and make all payments on time.
Rent-vesting: OK, so you can’t buy where you want to live? Instead, buy an affordable investment property, and rent in the postcode you want. The deposit and repayments will be lower for a cheaper property, and you’ll be into the property market with a tenant helping with mortgage repayments.
Family guarantee: if saving a deposit is the major impediment to buying a home, think about the family options. Family members can give you the money, as long as it doesn’t have to be repaid; a family member with property can go guarantor on the loan, meaning their property can act as security; a family member can be a co-borrower, in which the loan is jointly re-paid.
In the end, everyone who buys property finds it hard and time-consuming. Your challenge is new but not unique. The best you can do is be well-researched, well-advised and well-prepared.
And always remember, with property you’re playing a long game. It’s an asset that gives you security, a place to live and wealth-creation opportunities over your lifetime.
So don’t be demoralised: saving for a deposit might take a few years, but the benefits last for decades.
Originally Published: www.brisbanetimes.com.au