05 May What to consider when buying a property
Property is one of those hot topics that everyone is interested in. It doesn’t matter what stage of life you’re at, everyone’s talking about it. It all starts when you finish high school or leave home and suddenly you’re confronted with the possibility of paying rent. Then your group of friends starts to grow up and move into different stages of their lives. It starts with graduation, joining the workforce, getting a partner or married and before you know it, everyone’s talking about property. You start to look at property prices and follow property stories in the news. Suddenly you feel as if you should be buying a property. You contact real estate agents, attend Open for Inspections and start to get serious about investing in property.
Then it hits you. You’re going to need to save at least $20,000 – $50,000 if you want to own a property within three years, more if you plan to buy in Melbourne. That equates to between $128 and $320 per week. It doesn’t sound like that much on the surface. It does however fail to take into consideration that just because you have a deposit saved it doesn’t mean you can afford to buy a property.
You’ve still got to be able to service the loan. Most lenders will want you to spend no more than 30 percent of your income on your repayments. Anything over that amount is deemed unaffordable, however the media pointed out this week that those earning $100,000 or more will have a large portion of their income left after repayments, so it’s not always a good indicator of if you can afford your repayments.
For example, a person earning only $30,000 would be able to pay no more than $10,000 leaving them with only $20,000 of their before tax income.
Someone earning $100,000 could pay $30,000 and would have $70,000 of their pre tax income left over, which may not actually push them into mortgage stress like the person earning a lower amount would be.
When you plan to buy you need to do your research because purchasing a property is not just about the deposit. It is also about the repayments.
Naturally the larger the deposit you have, the smaller the repayments will be, so it’s worth considering saving for a longer period of time, or buying in a cheaper location and ‘rentvesting’ so that you can start building your equity and so you have your feet on the property ladder.
As previous generations have said, the hardest part about property buying is getting the first property. Once you’ve overcome that hurdle you will find it much easier to purchase your next property.
In addition to considering the repayments of purchasing your first property, you need to think about the associated costs. While the costs will vary based on the type of property you purchase, they can burn a bigger hole in your wallet, meaning that you need to think about what you can afford, and factor those costs into the purchase price.
You may not need to spend anything immediately, but it’s worthwhile allowing for a certain amount each week so that you have reserves available.
If you’d like more info about purchasing a property, and what to consider when it comes to the repayments, then feel free to get in touch with the team.