It’s officially been over one year since I became a home owner. I bought in July of last year in the height of the pandemic in Mount Gambier SA. Along the way I have learned a few things and I want to offer a few tips to those looking to buy their own homes in the future. These tips are separated into tips for before, during and after the buying process.
- See a mortgage broker.
My buying process went very smoothly and I put that all down to going through a mortgage broker. Once I had decided I wanted to buy, before even looking at any houses, I went and saw a local broker. Mortgage brokers aren’t loyal to a certain bank, instead will be able to offer a range of options from different lenders. This way, they can help you find the best bank and product specific to you, rather than just the best way to make money off of you.
Mortgage brokers don’t charge you for appointments, instead they receive a commission from the bank you choose to loan with. They continue to get this commission for the life of your loan, so they benefit best if they provide a good service. Why? If they look after you well the first time and find you the best product, you will be more likely to stay with that lender and they will continue to earn that commission. If you don’t like their service, or the product they set you up with, you are more likely to go elsewhere or refinance, and they stop earning that commission.
2. Have good money habits.
Buying a home is a big, often expensive commitment, and it is important to have your money sorted before you start. Ideally, you would have saved a deposit by now and shown that you do know how to save. The larger the deposit you have, the lower your repayments should be. If you have a smaller deposit, or almost no deposit, you might have some work to do with your money habits. Expenses will come up as a home owner and it is important to have good habits in place to combat these. Good habits include an emergency fund, knowing where your money is going, and paying your bills on time.
During the Buying Process
3. Borrow well within your means
The mortgage broker or bank will most likely tell you the maximum amount you can borrow. Just because they tell you that you can loan this amount, doesn’t mean that you should. This number should only be used as a guide and if you can loan below that amount you’ll be under less mortgage stress. Anything over 30% of your income going towards rent or mortgage repayments may cause you additional financial stress. Then add on top any rates, maintenance costs, bills or rate rises, and borrowing the largest amount you can afford could add way too much strain.
4. Keep money aside, separate from your house deposit
I believe it it important not to throw every cent you own into your deposit. Fees and expenses will most likely pop up soon after you settle and you want to have some funds put aside for these costs. If you don’t have a cash reserve you may need to use credit to cover these expenses, and getting into bad debt at the start of your home owning journey is not the ideal way to start.
When I settled my house I had 5k left over. If I could have my time over I probably would have left slightly more aside as I did feel uncomfortable having such a small amount in my account. I know this may not be small for some but I am used to three months of expenses at all times. I did also need to buy some furniture as well which stretched the budget and is something I will discuss further in the next section.
5. Don’t rush to buy all new furniture
Facebook Marketplace should be your new best friend! Just because you have a new place doesn’t mean all the furniture needs to be new. Furnishing the house should be a fun but slow process as you work out what you like and what would suit the space best! Buying all new furniture at the start will set you back a lot of money and you may find you won’t even like what you’ve bought in a few months time.
6. Find Ways to Reduce Your Expenses
The best way to reduce your expenses is to get people in with you to rent a room! Obviously this isn’t always possible and depends on your current lifestyle and house layout, however can be a great way to fast track your mortgage repayments and reduce your bills. Air BNB may also be an option if you want some extra income but don’t want someone there living with you full time. Setting up rules from the get go is also super important for anyone living with you, this will allow you to hopefully avoid any issues or at least make it easy to talk about any issues.
The other way to reduce your expenses is to be mindful of your electricity, gas and water use to keep your bills low. I am sure there are plenty of other tips out there to reduce expenses but these would be the main ones in my opinion.
7. Enjoy it & Celebrate!
Buying a home is a huge achievement and is something that should be celebrated! One thing I regret with buying my home is not really taking the time to celebrate it, I almost felt guilty while others were struggling with their finances thanks to COVID-19. Buying a home wasn’t a quick process and took years of saving so I should have taken the time to celebrate as I deserved it and worked hard for it. So learn from me and make sure to really enjoy the process and celebrate being a home owner.