Learn from other peoples mistakes. Here are some pre-emptive measures you can take in avoiding these costly mistakes when buying a home or investment property
- Not enough deposit saved. Saving a large deposit can put you on the front foot. You will have choice of lender and also you are considered less risk to the finance company. Having a smaller deposit could classify you a higher risk. For example this could be a higher interest rate, pay mortgage insurance or charge some additional fees. Saving a larger deposit will set you up and you will have a much better discipline for the future.Some lenders will consider lending you up to 95% of the value of the house, so you would need to save 5% plus costs, which can be up to 5% of the value of the house also. So having 10% of the value of the house would be a minimum, however, a whole new world opens up the more you save… consider up to 20% of the value of the house.
- The renovators delight. Spending too much on that first home without experience can cause heartache after settlement has happened. Many make the mistake not researching the costs involved in renovating before they make that initial offer and gain acceptance.
- The building or pest inspection. Consider the nasty surprise of finding a structural issue or termite problem after the fact. A building and pest inspection is recommended on all property purchases. As a buyer this has a two prong effect, you will know upfront the good the bad and the ugly of your new home, but more importantly, this can be used as a negotiation tool. Ask for a discount on the property is something comes out of the report. Once you have bought the property you do not have any legal protection and the previous owner doesn’t need to fix it if you find any termites etc. A small upfront cost is worth it.
- Borrowing more just because you can. A lender will consider your income and expenses, your assets and liabilities and calculate the amount you can borrow. Before you start the process research the properties and price guide you are looking for. Don’t blow the budget, consider the amount you can afford based on your essential and discretionary living expenses. If you choose to borrow more it may mean this will place a significant strain on your budget in the long run.