Download your FREE Own Your First Home Checklists here


Buying a property, wether it is an apartment or a house, is pretty daunting.
"Deciding to buy" will get you prepared with valuable information on financial
and legal matters.
Was this helpful?
  • Currently 3.3/5 Stars.
  • 1
  • 2
  • 3
  • 4
  • 5
   Rating 3.3/5
Share thisShare Send to Facebook Tweet this Digg this

How much can I borrow?



Whether you choose to buy a home, buy an investment property or rent, try to remember one word: Affordability.

Your monthly income needs to cover not only your home loan repayment and ownership costs but also allow you to live comfortably. You still have to pay for food, clothes, transport, entertainment, education and other living expenses on top of your mortgage payments. A useful guide is to ask yourself if your mortgage, rates, and other debts total more than 40 per cent of your monthly income. If they do, consider taking out a smaller home loan or continuing to rent while you save a larger deposit for your first home. Check out our How much can I afford to borrow calculator.


Affordability is Key


One way to work out if you are ready to rent or buy is to open a new savings account, either each week, fortnight or month – however way you will pay your mortgage – put into the account the amount needed for your mortgage, plus what you anticipate for expenses such as rates and renovations.

If you can save this amount for a good period of time, as well as feed, educate and entertain yourself, it looks like you've calculated the right mortgage amount. And if you’re struggling? Look for a cheaper first property to invest in, and therefore a smaller mortgage. Check out the budget calculator and work out how much you need to save.

Buying a Property with Family or Friends


With Australian property prices increasing, more and more first home buyers are looking at purchasing properties with friends and relatives. But keep in mind that old adage ‘Never mix business with pleasure’, is this the right step for you?

The Pros
Buying a first property with a family member or friend is, for many, the only way to get into the property market. You may simply not be able to afford a property in the area you want, you may not have a large enough deposit ready, or your own salary may not cover the monthly mortgage costs.

Benefits to this solution may include:
  • You share the deposit and initial costs, so you don’t need to save as much money.
  • You share the mortgage.
  • You share rates and household bills.
  • You share renovation and maintenance responsibilities.
  • You are on the property ladder earlier.
  • You are investing in your financial future.

The Cons
Buying a first home with another party means you are depending on them to honour their mortgage agreement, and their commitment to you, over a long period of time.

Risks may include:
  • If one person defaults on the mortgage, the other person has to cover that mortgage. The other party may not keep to their promises about maintenance, renovation, etc.
  • Mortgage payment protection and life insurance will probably be needed.
  • You may not be able to adapt your mortgage or sell the property at your ideal time. Get the latest property news and discover property from hot spots at www.residex.com.au
  
related links
7 step email support program

Sign up now for monthly info, tips and tools to support you throughout the process of buying your first home.

How much can I afford to Borrow for my First Home?


It’s a cliché but only because it is true – buying a house will almost certainly be the most expensive purchase you will ever make. A more interesting question is exactly how expensive should your new home be: how high can you (or you and your partner) afford to go when looking for your first home?

It is very frustrating when real estate agents quote ‘low 500s’ as a guide price but on auction day you watch the property price sweep well into the 600s. Knowing where your financial limits lie is vital, whether you are looking for a one-bedroom house in rural Tasmania or an inner-city apartment in Melbourne. Conventional wisdom – and the official definition of ‘mortgage stress’ – states that your mortgage repayments should not exceed 30 per cent of your gross income. However, that may be a slightly simplified view, and the amount you can borrow for your first home purchase is usually related to your average, post-tax disposable income.

Various other factors do come into play, however, and these include:
  • Your liabilities – debts you need to service, (e.g car loan, credit cards etc)
  • Standard living allowances.
  • The current home loan interest rate.
  • The term of the home loan.
  • Whether you have any dependants.

Lenders Mortgage Insurance


Lenders mortgage insurance is sometimes payable when you have less than 20 per cent of the purchase price as a deposit for your new home. It’s an upfront fee that insures the lender against any default on your home loan. It does not insure you against default on your loan.

Help from Your Home Loan Consultant


First time home owning can be confusing so your home loan consultant is here to help. There are many different types of mortgages available to suit your individual needs. If you are wondering about buying versus renting a home, or whether you need lenders mortgage insurance, we are here for you. Your home loan consultant can also help you apply for the first home owner grant and talk you through the options regarding your deposit.


To find out

how to choose a legal representative

, visit the next page

Go to the next step:

Finding the right loan