May 17, 2012

A New Home: are You really Ready?

With the likes of the first home buyer incentive and other initiatives, it is easy to make the decision that it’s time to buy, just because you have a deposit.  But having that first 10 per cent doesn’t necessarily mean you’re ready. Do you really know what you’re in for?

When buying your first home, it is not uncommon to start the ball rolling without really knowing what the entire process entails. If you’ve decided you want to buy, do you know what your ongoing obligations are? Do you know how your home will affect you at tax time? Do you understand what interest rates are and how they work? If you can’t answer yes to these, it’s likely that a little research will go a long way in preparing you to be truly ready to make this big and long-term purchase.

What are some of the things you need to consider?

1.   Your finances
Buying a house obviously costs a lot. You may have a strong deposit ready, but do you have some cash on the side for the costs that go a long with buying the house – the little things that people never tell you about? Have you looked into how much your solicitor will cost? What about your building and pest inspections? Your accountant? Then there’s duties, tax, strata, the council rates, the water and any other fees that you need to cover prior to settlement and the keys being handed over. What about removalists or even interstate removalists if you are moving far? The first thing you need to know is that your cash needs to cover a lot more than just the deposit.

2.   Do you know what you want?
It’s easy to think you want a house that will be a good investment in an approximate area, but keep in mind you will be paying this home off for the next twenty-odd years, and possibly living in it, so it needs to closely meet your specifications. Are you after a flat, a new build, a kit home, or just something you can call home? Know what you want, and know that it will continue to meet your needs, at least for the next five years.

3.   Repayments
It’s a simple one, but is the undoing of many people. Can you afford your mortgage repayments? What if interest rates rise by a few percentage points? When it comes to thinking about the repayments, you need to consider factors like your employment. Are you and your buying partner securely employed? Is there any risk of termination of employment – and salary – at all?

4.   Your buying partner
It’s a tough thing to ask yourself, but you have to – is your relationship secure and mature enough to commit to this sort of ongoing obligation? If you and your buying partner have a falling out, you might find it very difficult to pay the mortgage on your own – is it worth getting separate loans so both your obligations are separate and very clearly laid out?

5.   What plans do you have?
You may have just married and be planning on kids immediately, want to take a big trip, or just be in line for some serious designer fashion. If you don’t want to change your plans for the future, think about it – can you afford to do both, or should the house buying be put on hold?

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