You may be emotionally prepared to settle down, but how to be sure you are financially ready to purchase your first home in Adelaide? Taking on a home loan is one of the significant financial decisions you will ever make. Hence, before you make the call, it is a good idea to take a step back and consider all the expenses attached to owning your first property.
Here are four things that our expert mortgage advisors ask you to consider before taking a home loan. And, if you are unsure about any of these factors, it could be a sign you are not financially ready to buy.
1. Have A Practical Budget, And You Must Know How To Use It
Right money management skills are a must-have for many first home buyers in Adelaide. You will need to be ready for new expenses, like home insurance, water bills, and council rates. And, perhaps for the first time, you will be responsible for the maintenance of the water heater, all appliances and overall property management to ensure you can cover the expenses (along with your home loan) if things need to be repaired.
2. Have The Requisite Deposit
The advised deposit needed is typically 20 per cent of the property price. Coming up with a house deposit can be one of the most significant obstacles for many first-time buyers; however, there are ways around this with specialities like LMI (Lender’s Mortgage Insurance).
The advantage of having a bigger deposit is that you will have more equity in your property from the start. Typically, in the early years, a large portion of your repayments are towards interest and a smaller sum towards the principal. Hence, the more equity you have upfront, if you need to access or sell funds in crisis, you have greater flexibility.
3. Learn How Much You Can Borrow
When you plan to fulfil your great Australian dream, it is critical to consider what you can afford now. And, at the same time, put some consideration into the future of the property.
Will you be buying as a single or couple? If you are borrowing with your partner, you might be able to make high repayments while both of you are working, but what happens if one of you stops working.
4. Be Ready To Withstand Rate Increase
While interest rates are low, it is predicted by industry speculators a rate will rise shortly. Therefore, it is wise always to have room in your budget for a market shift.
For instance, make your calculations based on assumptions like, would you be able to afford the loan repayments if the interest rate increase by 1 per cent?