Top 5 tips to financing your new property

Property purchases involve big financial decisions and long-term commitment. You’ll want to base these decisions on rock solid information, this will help avoid unwelcome surprises down the track. ‘Forewarned is forearmed’ is an excellent motto for any prospective home buyer about to assess their finances.

Here are five key steps you should undertake.

1. Do a financial health check

This is an in-depth analysis of your finances to determine if you can actually afford to buy. Ask yourself:

• What is your income, savings and the value of any assets?
• Should you sell your assets to purchase the home?
• What are your debts and expenses?
• What is your future income and expenses? Consider potential lifestyle changes such as having children, as well as the ongoing expenses of the new property.

You should also look at external factors such as:

• The current interest rate, the interest rate forecast, the economic climate
• The median property price, sale price trends and forecasts for similar homes in the suburbs you are considering

2. Get professional help

There are a range of professional services available to help you when you decide to purchase a property. You should always shop around before you engage someone as fees and the quality of service can vary substantially.

Key property professionals include:

• Financial advisor
• Lender
• Mortgage broker
• Buyer agent
• Solicitor or conveyancer

3. Set a budget

Home buyer budgets are typically split into two categories – upfront costs and ongoing costs. Go through all costs carefully to get them correct – not to do so puts you at risk of defaulting on your loan repayments and being in serious financial trouble.

Upfront costs include:

• Deposit
• Stamp duty
• Legal and conveyancing fees
• Mortgage and lender fees
• Building inspection fees
• Valuation fees
• Buyer agent fees
• Moving fees

Ongoing costs include:

• Interest and loan repayments
• Maintenance
• Insurance
• Council rates or strata rates or both
• Utilities
• Potential increases to interest rates

4. Save for your home

The best way to save is to cut household costs. With a bit of research, most people will be able to find ways to reduce their spending. You can generally save money on groceries, electricity and water bills, clothes and household items. Consider lifestyle changes, such as cutting down on eating out and holidays, try borrowing books or making your own gifts and so on. Be creative – there are unlimited ways to save money.

5. Find a suitable home loan

Securing a great deal on a home loan is essential; even the smallest differences in interest rates and fees will add up over the long term. Invest the time in comparing and contrasting lenders and the mortgage deals they offer, including loan features and benefits, fees and interest rates. Be aware of mortgage agreement red flags and ensure you know what lenders look for to avoid having your loan application rejected.

If you’re looking at purchasing a new home, get your finances in order with our Home Buyer Financing and Budgeting Guide.