With interest rates at an all-time low, the cost of owning a home is almost on par with the cost of renting. In this current climate, if you’re considering buying your first home, there are several factors to consider before taking the plunge.
Much has been made in the media of how growth in the property market has eased off from its previous gains – but historically, a significant contraction in the Australian market is rare.
Those waiting for the looming ‘housing market crash’ to hit before they purchase, may be waiting a while. Except in extreme circumstances, the cost of housing is not going to get any cheaper, so the common wisdom is that the sooner you can get a foot in the door, the better.
Give and take
Apart from home loan repayments, there are further costs to consider when approaching home ownership. These costs centre around the adjustment you may have to make to your lifestyle due to your new financial situation. The decision to purchase will have financial consequences for years to come, so consider it from all angles. Make sure you cover all the potential costs involved with your home loan and plan how you can incorporate them into your budget.
The good news is: everyone who fears the effects of the ‘lifestyle haircut’ discovers that the adjustment isn’t as turbulent as they’d imagined.
Act today for tomorrow
You might be finding the auction scene a little tough; continually missing out by the narrowest of margins. If this is the case, it might be wise to consider paying that little bit more now because if you keep missing out, it might cost you an additional $50-80k in 12 months as the market goes up. Taking a big picture view can pay off in the long run.
Ladder to success
While you might not have all the funds you need to secure your dream home now, the smart step is to put a plan in place for the future. Buying an investment property and continuing to rent, otherwise known as ‘Rentvesting’ is an option that many first home owners are using as a way of breaking into the housing market now rather than later. If you’re in a position to take this step, you can then leverage this property at a later stage to work your way up the ladder and eventually secure your ultimate property.
In the context of the current market and the changes you need to start making, weigh up your options, live in the moment and focus on accurate projections. This will put you in a premium position to take a lucrative leap into home ownership.