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I recently joined the home owners club, which means I’m now free to paint my walls and have as many pets as I like with no landlord to tell me otherwise. Oh, and pay to fix the leak in the laundry that appeared within 18 hours of moving in. Yippee! I was quickly reminded that being a tenant did have some upsides.
Leaky welcome gift aside, after a 100-day settlement, it felt great to be unpacking my plates from the butcher's paper I swaddled them in only the day prior.
My husband and I had been thinking about buying for some time, and several factors went into the purchase, which ultimately involved moving to a new suburb an hour from the CBD, and of course, taking on a sizable mortgage.
Based on my experience, I’m going to share what to consider if you’re embarking on your first home-buying journey.
Work out your borrowing capacity
The first step of any property purchase needs to be assessing your borrowing capacity. We went to a mortgage broker we know and trust, as they can access a panel of banks and lenders for us to apply with.
Your borrowing capacity is effectively what a lender believes you can afford to repay based on their calculations. They’ll take into account your:
income
assets
liabilities
dependents.
They’ll also assess what kind of loan you’re eligible for. Together with your deposit, this will form the funds you’ll use to buy the property.
I always remind people that they don’t have to spend the maximum they’re allowed to borrow. A lender may calculate your maximum borrowing power, but there’s nothing wrong with borrowing less if you value lower repayments or being less stretched financially.
Why it’s important to browse properties at different price points
Once we knew what we could borrow, we could start looking at what we could get for our money. We had a rough idea of where we might move to, as we knew properties were cheaper there, but we hadn’t looked at the market in too much detail.
Property prices will vary based on:
Location (proximity to good schools, public transport and amenities).
Size (land size, room size and number of bedrooms).
Property type (apartment, house, unit, etc).
Features (back yard, garage, parking).
We looked at properties with varying numbers of bedrooms and bathrooms, different sizes and proximity to amenities, across a few suburbs. The price range had a $150,000 variance. This helped us weigh up what our priorities were, and the price differences between features.
I’m self employed, so a smaller mortgage was more important to me than a premium location. Equally though, my husband commutes to the city for work, so a manageable walk to public transport was also important. A second bathroom or toilet was a nice-to-have, but we were willing to sacrifice it for the right property at the right price.
We wanted to be close to nice places to walk, like parks and open spaces. This mattered more to us than the size of the kitchen. After a few visits to different suburbs, we realised which one we preferred, so we narrowed our search and began weighing up prices with more certainty.
As we inspected different properties, we noticed the things we were keen on impacted the price the most. An extra bathroom added to the price. A large dining area added even more.
Eventually we narrowed in on properties that balanced price expectations with the combination of features and location that we were willing to pay that price for. We ended up compromising on some of our wish-list criteria, but ticked the ones that mattered most.
Be aware: you’ll likely need to weigh up the cost versus the benefit of each of these factors to establish your own priorities. A less favourable location may be cheaper, but you could get much more space or extra features.
Take a look at government schemes
We weren’t eligible for any government schemes due to having owned property before, and the home we bought not being a new build. However, there are schemes available for first home buyers, so check if you are eligible.
The method of sale impacts property price
Properties are generally sold via auction or private sale. In some less common cases, the sale may involve sealed bids or a boardroom auction. But what’s good know, is that the method of sale can significantly impact the purchase price of a property.
We viewed some properties that were sold via private sale, but many went to auction. We began attending auctions in the area to see what demand was like, and which properties had the most bidders.
Auctions can result in properties selling well above their quoted range if there are multiple bidders competing against one another. But equally, if nobody else wants the property, you’re in a great position to negotiate if the property ‘passes in’.
Don’t forget building and pest reports
Ordering a building and pest report should be non-negotiable if you’re seriously considering buying a property – especially at auction. An auction sale is usually final, meaning you can’t back out if a problem arises.
Building and pest inspections can cost a few hundred dollars, and involve a licensed inspector visiting the home and checking the structural condition and any risk of pests.
While there’s an upfront cost, the report may help you negotiate a better purchase price, or help inform how much you’re willing to spend on the property, particularly if it reveals major defects.
Unfortunately, the cost of these reports can add up if you’re ordering them on multiple properties that you don’t end up purchasing – but it’s not a corner worth cutting.
💡if another buyer has ordered a building and pest inspection, you may be able to purchase the report at a discounted price by asking the selling agent for details of the inspection company. This is because the inspection has already taken place and you’re basically getting a copy.
Have a good team of experts around you
When buying our home, our mortgage broker and conveyancer were critical to the process. If you can, get some recommendations before choosing as you'll be relying on them a lot during the entire home buying process.
While you are house hunting, you may also consider engaging a buyer’s agent to help with your home purchase. They work for you as the buyer – to help you inspect, negotiate and bid on properties – using their extensive experience in the industry to help you get the property you want. They can also be helpful if you’re buying in an area that you aren’t familiar with.
We ended up finding our perfect place on our own, but I was shopping around for a buyer’s agent in case we needed some extra assistance.
Always factor in extra fees
When you’re spending hundreds of thousands of dollars on a property, a few hundred dollars in bank fees might seem insignificant. But the little costs add up.
Your conveyancer will charge for reviewing the contract, transferring the property title and taking care of other transactions to make the home yours.
Your lender may also charge package fees for your mortgage product or other fees linked to your home loan.
And of course... the not so little fee of stamp duty. This tax is usually calculated as a percentage of your property’s value so can be quite hefty. If you’re a first home buyer, you may be entitled to a concession or an exemption depending on your state or territory’s rules.
Bottom line
Buying a home takes time and being patient is important.
Besides scraping together a deposit, you need to weigh up what you really need from your wish-list. It’s likely you’ll be making some sacrifices. Will you buy a smaller property in a more desirable location at a higher cost… or will you move to the burbs for more space and better value for your money?
Remember to do your due diligence – never cut corners and be prepared for extra costs along the way.
This is one of the biggest financial decisions you’ll make so make sure it’s right – for now and the years to come.
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Financial disclaimer
The information contained on this web page is of general nature only and has been prepared without taking into consideration your objectives, needs and financial situation. You should check with a financial professional before making any decisions. Any opinions expressed within an article are those of the author and do not specifically reflect the views of Compare Club Australia Pty Ltd.
