Importance of budgeting when buying a home
It's often said that property is the most expensive purchase any of us will ever make, which is why it's so important to take a serious approach to your savings. Having a budget in mind will help focus your efforts and ensure you have a significant supply of funds for when you finally do make the move.
The good news is that Australians do seem to be taking their personal finances more seriously. A report from the Treasury found that households are saving more of their disposable income now than in the past 20 years. Some of this is a result of the Global Financial Crisis, which shocked many people into making sure they have a nest egg in place.
Moving house is more than just about securing a decent rate on your home loan. It also involves taking various other costs into account something you'll only ever be able to foot the bill for if you've put a budget in place.
Put your end goal in sight
With any major financial purchase comes the need for financial planning. If the latest research from Westpac is true, this is something many Australians have chosen to aim for over the course of 2016. The bank found that 69 per cent of adults have made financially-focused resolutions, with 85 per cent of this total setting themselves a particular savings target.
In fact, Australians are aiming to set aside $11,234 this year: a total that would make a big difference to both the deposit on a new home and any additional costs they will face. The Westpac New Year's Resolutions Report found that the biggest challenge for most people is making sure these savings ambitions stay on track, as many admitted to having fallen short of their goal in the past.
If you have a firm idea of the type of house you want to buy, as well as any other major purchases you will need to make, then this will help focus your savings efforts right from the start. You might also find you have a better idea of how long it will take to reach your goal.
Know the costs are involved in buying a house
Once you've established a realistic budget, it's time to think carefully about all the costs you're likely to face. The Real Estate Institute of Australia (REIA) advises that repaying a home mortgage is just the start, as there are various other fees you might encounter during the buying process.
Among them are mortgage registration fees, stamp duty, land transfer registration charges and fees imposed by your conveyancer or solicitor. This can all amount to hundreds if not thousands of dollars, so it pays to be aware of what's in store.
As the REIA points out, property is a long term investment, so it pays to get it right first time. If your finances are in the best possible position from the outset, then you have every opportunity to make the most of your purchase from the very start.
Determine whether you're ready to buy
The best person to decide whether you're financially prepared to enter the property market is you, which is why you'll need to take an objective look at your savings once in a while. If you do find that you're not on track, think about what you can do to tighten up your budget and turn the situation around.
If you're buying with someone else, it's essential for you to both be on the same page. One of you might be religiously sticking to your budget, while the other can't seem to stay on track. Whenever this is the case, it's important to review your efforts and see where any changes can be made.
Other external factors may also play a part in your decision over whether now is a good time to buy. This can include areas such as if a fixed-term period on your savings account has come to an end, and if you'll face a charge for withdrawing your cash. Some accounts come with early exit fees, which is something else you should take into consideration.
Once you're firmly ensconced in your new home, your outgoings won't stop there. Figures from the Australian Securities and Investments Commission (ASIC) show weekly spending will vary depending on where you live. The highest total was registered in the ACT, where residents spend an average of $1,536 each week, while South Australia was at the other end of the spectrum on $1,044.
You will need to factor in a range of costs, including medical care, energy bills and insurance. Including these in your budget from the outset is a good idea, as it will make sure you're still in a decent financial position when you move into your new home.
If you don't choose a fixed home loan, then you also need to prepare for the possibility that your rate will increase. This is something you will need to think carefully about before deciding which type of mortgage is best suited to your needs. A mortgage advisor will be able to talk you through the various options and help you come to the right decision.
Securing a home loan that's right for you
The type of home mortgage you choose can make a real impact on your finances both in the short and long term. Speaking to a loan expert will help you narrow down your choices and see which products are likely to fit best with your financial situation now and well into the future.
Our team of experts is on hand to discuss what options are available and hopefully find a mortgage that meets your requirements. If you need a hand with mortgage refinancing, we can also assist in this area too.