Owning property requires a big commitment. One of the key contributors to reaching financial independence is through owning property. In recent decades, many people have found pricing affordability difficult. As prices increase, its obvious than many Australians will continue to find this worse over time.
There are many ways to increase your ability to afford a home, but many Australians cause themselves ways to not make it work. In this market insight we’d like to highlight three ways how buyers stop themselves from owning property.
1: Failing to establish a cash budget
The secret ingredient to making good financial decisions of any kind, is having an established cash flow budget. Having a clear understanding of your saving capacity will ensure you know what you can afford to repay when obtaining a home loan. It will also help you determine where you can improve your budget by reducing expenses or perhaps removing some. You may have subscriptions and/or memberships you could suspend or remove. You may also find you can dial down on your entertainment costs. When establishing a cash flow budget, its important to allocate entertainment into the budget. Owning property is one thing, but you need to be happy too!
In our experiences many buyers don’t make time to do this. Some reasons are, it’s too time consuming, it’s scary or overwhelming, I don’t want to see how bad I am with money etc. Owning property is a large commitment, so its reassuring to see what your cash flow looks like before signing a long term loan.
An effective way to do this is to practice or pilot the budget. You can do this my directing the excess savings to separate bank account. Learn if its sustainable and learn you are willing to commit to this long term.
The difference between having a budget or not will make a huge impact to making buying a property or not.
2: Not setting any objectives
Another way how buyers stop themselves from owning property is by not setting a goal or objective. The property market landscape is huge, so you need to refine your requirements in advance.
Some great examples are:
- What location do you want to buy in?
- What style of home (standalone house, apartment or townhouse)
- Are you buying it to occupy or invest?
- How many bedrooms?
Setting your objectives also involves determining how much you want to spend. The cash flow budget compliments the process when establishing your goals. If you have an objective to buy a 4 bedroom house within 15 kms from the Melbourne CBD, but can only afford $450,000, you’ll need to quickly revise your objectives to tailor your affordability.
3: Having no idea about loans and applying for them
There are many types of loans to cater many different type of transactions. When it comes to property acquisition, you will soon discover that there are many choices to select. Some buyers often pay too much attention on the interest rate, but there is more to consider. Employing a mortgage broker is highly recommended. They will provide unbiased advice, explore your options and offer you a loan product best suited to you. An example on interest rates… A low rate is important, but if you review it with another lender that offers a slightly higher rate, but willing to borrow you an additional $100,000, this can dramatically improve your chances of owning property.
Applying for finance can also make or break your chances. You obviously need to be honest with your circumstances, but in many cases you may need to make some changes before submitting a loan. Again, a mortgage broker is a great trusted partner who can help assess your circumstances beforehand. Some changes may be quite small, while other may not.
Here are some examples:
- Removing or amending your a credit card. You may have a credit card balance of zero, but lenders are conscious that this is readily assessable debt to daw down on. Removing the credit card (if you don’t use it) can help. Meanwhile, reducing the credit card limit may also alter your borrowing capacity.
- Providing consistent employment. If you are in probation, banks will want to see you are in long term gainful employment before offering a loan. If you demonstrate job stability, this is quite influential for a positive outcome.
- Demonstrating a history of servicing debt. If you are always in arrears or paying late, this will heavily impact you from getting finance. Before submitting a loan application, you will need to show 6 months of loan statements.
- Checking your credit file at www.mycreditfile.com.au to ensure you have no outstanding black marks against you.
Get advice before proceeding
The value of professional advice will fast tract your chances of owning property. You may need assistance from different professionals such as accountants, financial planners, mortgage brokers or property advisers (property advocates). Having a team of people will help you make the best decision and in a timely manner.
At Crest Property Investments we specialise in sourcing brand new and off the plan properties for buyers. If you’d like to learn more, please don’t hesitate to contact us. We do not charge fees to buyers.
September 2021
While we have taken care to ensure the information above is true and correct at the time of publication, changes in circumstances and legislation after the displayed date may impact the accuracy of this article. If you want to learn more please contact us. We welcome the opportunity to assist you.
