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First homebuyers: The new, old rules for buying property

16/03/2011

Buying your first home may not be as easy as it used to be, but it is definitely achievable, according to Smartline.

Smartline Personal Mortgage Advisers Managing Director Chris Acret urged discouraged first homebuyers to take heart because there were many ways to get a foot in the property market.

“Granted, there’s a lot of talk at the moment about first home buyers being ‘pushed’ out of the market because of higher median house prices and a changing lending landscape which is affecting affordability, but it really isn’t all doom and gloom,” Acret says.

“What this does mean, however, is a return to some ‘old-fashioned’, tried and true goal setting, plans and techniques to help you achieve your goal of owning your own home.

“Getting started can seem overwhelming, but once you’ve got a plan in place just add determination and you’re already half way there.”

Acret says changing your ‘money mindset’, creating a savings plan and getting organised was a good way to start.

“First homebuyers building a deposit may need to change their money mindset from one of spending to one of saving,” Mr Acret said.

“Culturally, we’ve developed a long-distance relationship with money largely because we rely so heavily on credit, so we’re somewhat divorced from the process of spending money – it’s easier to buy a $200-item on a credit card that to fork out $200 in cash.

“Lenders are keen to see savings increase over time, so set up a savings account and make saving a new habit. It can be very empowering to see your balance grow over time.

“You can further boost savings by taking advantage of lenders’ bonus saver-type accounts or by taking advantage of the federal government’s First Home Saver Account scheme, which provides a tax effective way to save for a first home.”

Acret says that it is equally as important to ensure you are paying all your bills on time and managing unsecured debt such as credit cards.

“This demonstrates to lenders that you’re reliable and able to manage your money well,” he said.

“It’s a good idea to reduce your dependence on credit as much as possible. Depending on how many credit cards you have, you may consider cutting up all of your credits cards except one and reducing the limit on that card to around $1000 to $2000.

“Lastly, it’s worthwhile checking your credit history to find out if you have any unpaid or outstanding bills, such as a mobile phone bill. If you do, pay them off as quickly as you can and ensure that these ‘black marks’ are removed from your credit file – a good mortgage adviser will have access to your credit file and can help you sort this out early.”  

Mr Acret says first homebuyers should research and get to know the property market, and consider speaking with a mortgage adviser to find out how much they can borrow.

“Learning about the property market is an excellent first step in helping you to set your property ownership goals,” he said.

“But, do be realistic and prepared to make compromises. Understandably, it’s easy to get caught up in the excitement, but it’s important to temper that with the understanding that you’re just entering the property market – not buying your dream home.”

Mr Acret also cautioned that a loan pre-approval was not a guarantee of approval. Rather, it should be used as a guide only.

He also suggests first homebuyers who are keen to examine all the options speak with a mortgage adviser about what might be involved in a family guarantee or buying a home with a friend.

“A family guarantee allows a family member – usually a parent – to use equity in their home as security on your home loan,” Mr Acret explains.

“Alternatively, you might consider buying property with a sibling or friend.

“It’s good to know that there are many options available to first homebuyers. The advice and guidance of an experienced adviser can be invaluable.”

 

Smartline tips for first homebuyers:

  • Be prepared to change your ‘money mindset’ and reduce your dependence on credit.
  • Make saving a new habit and give your savings a boost – visit homesaver.treasury.gov.au.
  • Get organised and pay your bills on time. 
  • Check your credit history – visit vedaadvantage.com.au or dnbcreditreport.com.au.
  • Research and seek advice.  Get to know the property and lending market – visit Smartline’s A-Z Loan Guide and calculators at smartline.com.au, and order your free copy of The Smart Guide to Mortgage Finance.
  • Be realistic and prepared to make compromises.
  • Consider a family guarantee or buy with a sibling or friend.

As always, talk to your Smartline Personal Mortgage Adviser for more information.

 

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