First home buyers ready to pounce
Eager first home buyers are keen to get their foot on the property ladder this year after building up savings during the pandemic.
The property market has swelled with entry-level buyers in recent months and this is expected to continue throughout 2021 so experts have shared with SMARTdaily their key buying tips.
New independent research compiled on behalf of Mortgage Choice quizzed more than 1000 respondents and found first-time buyers, in order to save and buy sooner, have done the following:
• 86 per cent changed their saving and spending habits since the onset of the pandemic.
• 60 per cent reduced spending.
• 59 per cent are adding more money to their savings.
• 43 per cent are applying for government grants as first-time buyers.
Registered nurse Rocky Luong, 26, and his partner Monica Martinez Perez, 31, who works as an optical dispenser, have together saved up a $90,000 deposit and are ready to make their first property purchase.
It comes after years of Luong being despondent about the fact he would never be able to break into the property market.
"I was kind of mentally preparing myself to rent my whole life; I was misinformed on what to expect with buying a house and how much it would cost," he says.
"This was until COVID-19 hit and we were spending less than normal; we started saving more and we moved in together before COVID hit.
"We started looking at property and realised it was achievable."
The pair is renting a one-bedroom unit in Carnegie in Melbourne's southeast for $1410 a month and looking to buy a three or four-bedroom home.
Together they earn about $120,000 a year and are hunting for a property around the $600,000 mark.
Data released by the National Housing Finance and Investment Corporation showed that in August the ratio of first home buyers purchasing property was soaring - it was 41.7 per cent, which is more than 10 points higher than the long-term average.
Mortgage Choice broker David Thurmond says first-time buyers who are unsure of whether they are in a position to purchase property should first seek advice and do their sums.
"Make a phone call; it takes five or 10 minutes talking with a client to know where they stand and how far away they might be from buying a property," he says.
"Even if they are 12 or 24 months away we still like having that initial chat and then we can put a plan in place; potential buyers might be closer than they think."
The research compiled for Mortgage Choice also found one in three first home buyers had minimal confidence in understanding how to choose the right home loan.
Getting pre-approval on a loan allows the purchaser to get a clear picture of how much they can borrow.
Pre-approval usually lasts for about three to six months before it expires and a person's financial situation needs to be reassessed.
Thurmond says borrowers should ideally have a five to 10 per cent deposit of the total property price tucked away when they are ready to buy.
Mortgage and Finance Association of Australia chief executive officer Mike Felton says borrowers should also factor in charges on top of the loan.
"First home buyers often make the mistake of focusing solely on borrowing capacity and then are disappointed when they realise how far they are from being able to complete the property purchase because of the costs associated with buying a property," he said.
"Legal costs, conveyancing costs, lender's mortgage insurance and stamp duty can all impact on the actual amount needed to purchase the property."
FIRST HOME BUYER TOP TIPS
• Ideally have a 10 per cent deposit saved
• Speak to a lender or mortgage broker to find out how much you can borrow
• See if you are eligible for any government grants or stamp duty exemptions
• Do your research on property prices so you are realistic about where you can afford and where you are looking
• Get finance documents in order, i.e. bank statements, pay slips plus birth certificates
• Work out what type of loan suits you and ask all questions until you understand the fees and charges associated with the loan. There are no stupid questions when it comes to money so don't be put off
• Read the contract of sale carefully and always consult a conveyancer
Originally published as First home buyers ready to pounce