Does it seem like your dream home is disappearing further and further out of reach? You’re not alone. Australia’s housing affordability is among the worst in the world. House prices are incredibly high and people are having to get creative when it comes to purchasing.
But by thinking outside the box you can increase your purchasing power and maybe find yourself signing on the dotted line sooner than you think. So, have you considered these options?
More and more first home buyers buy properties with friends, which is a great idea. The key to this is getting some really solid legal advice beforehand. Make sure you have a very detailed contract drawn up, in case anything goes awry. Have a thorough discussion about if and when you plan to sell, what will happen in the event of job loss, or what you’re going to do if one of you wants to sell before the other is ready.
There’s also a big trend in parents going guarantor on their children’s loans, or parents giving their kids an early inheritance. Sometimes this “help” comes in the form of a lump sum payment, or parents and family members can use the equity in their own home to provide security for a portion of your loan. It’s a fantastic gesture, but it’s important that parents get good legal advice around exactly what they’re entering into.
Don’t be rigid about what you’re after – the idea is to get a foot in the door, not buy your dream home at the first auction.
Consider the following:
• Landlording – Get help paying your mortgage by renting out your extra room. Having a housemate also means splitting utility bills – even more money saved.
• Buying off the plan or building – Purchasing off the plan means you only pay stamp duty on the value of the land, not the house and land, potentially saving you tens of thousands of dollars.
• Buying a subdivided lot – Fewer square metres equals fewer zeros at the end of the purchase price.
• Buying in the next suburb out – You may have your heart set on a certain suburb, but once you’re in and settled, is being five minutes further out really going to matter more than having a bigger garden or an extra bedroom?
To get a loan, you need to be able to show you’re able to repay the loan, meaning you need a healthy savings history. So shop around for a high interest savings account, and start to make regular deposits.
If you really want to get ahead fast, consider one or more of the following options: moving back in with the parents for a bit to save on rent, selling your car or forgoing your next overseas holiday. Yes it will hurt, but keep the big goal in sight and make a deal to treat yourself once you’re in your dream home and have your mortgage payments down pat.
Remember, it’s not just the deposit you’re saving for – you’ll also need money for stamp duty, legal fees, mortgage insurance, pest inspections, building inspections, moving and other fees.
One bit of good news is that banks are now starting to recognise rental payments as a form of savings, which is fantastic news for first home buyers.
There’s always a way to boost your income and your savings capabilities if you’re savvy. Ditch the gym membership in favour of a jog (better yet, walk other people’s dogs and get paid to do it), sell unwanted things on eBay, join a focus group and earn money just by having an opinion – even consider working a day on the weekend.
Yes this is all hard work and no play but sometimes you’ve just got to grit your teeth and remember it’s all part of the long-term plan: to have you in that dream home one day.
[author image=”http://www.woman.com.au/wp-content/uploads/2013/07/kirsty-lamont-2013.jpg” ]Kirsty Lamont is a director of comparison site Mozo.com.au which helps Australians save on home loans, credit cards, insurance and other financial products. At the age of 25, Kirsty suffered serious first home buyer pain when property prices were moving faster than you could save. After 18 months of searching and having to sell her car and ditch a trip to New York to boost her deposit, Kirsty finally scored her dream apartment and has never looked back. [/author]