So, you’re buying your first home – how exciting! It’s a huge milestone in your life and sure to be one of the biggest changes you’ll ever experience. But before you lock in your home finance, take some time for a little self-reflection – it’ll go a long way toward minimising any unwanted surprises later on!
The first step to home ownership involves strict budgeting, which comprises analysing your current situation and working out how much you can afford to repay. Be honest here – no matter how much you want that gourmet kitchen, triple garage and deluxe theatre room, are they really worth the crippling home finance repayments?
Here’s how to determine your home loan budget:
1. Begin with your total monthly gross income
2. Determine your monthly expenditure (food, clothing, bills, insurance, transport – everything except rent, which you’ll no longer be paying!)
3. Subtract your total monthly expenses from your total monthly income. This is roughly what you can afford to repay each month on your home finance. If you’ve got an unusually high amount left over, ask yourself whether you’re being honest about your expenses or whether you’re fudging the figures so you can afford to borrow more for a better house. Remember - you’re only cheating yourself!
4. Factor in your future, such as where your job’s headed and family plans. Just because you can afford high repayments now, doesn’t mean you will later.
Now that you’ve worked out the set amount that you can afford to repay each month, it’s time to find home finance that’s right for your budget. There are many different loans out there, but here are three home finance options popular with first home buyers for different reasons.
Want to hit the ground running and put a dent in your mortgage straight away? With this home finance option, you pay a discounted ‘introductory’ variable rate during the first 12 months or three years and won’t be penalised for making extra payments at any time.
If you want to be in full control of your budget, this is for you. It locks in an interest rate for a period of one to five years, which means you’ll always know exactly how much you need to pay every month.
Standard Variable Rate
This is flexible home finance with a ‘variable’ rate that changes with the market. So if interest rates are currently low (and look set to continue for the foreseeable future) you can cash in. You also pay no monthly fees or transaction fees. The downside is that budgeting is out of your control to some extent, so you’ll need to ensure you give yourself a lot of breathing space.
If you’re thinking of building a new home, talk to a team that can make the process stress-free and easy.
According to Jared Stone, Sales Manager of Easystart Homes (builders of the most affordable homes Perth wide), the initial decisions you make will go a long way towards making your home buying experience the best it can be. “There is a lot to consider when building your first home,” he said. “Quality home finance advice from the outset will make sure you build a home you not only love, but a home you can actually afford.
“That's where Easystart Homes comes in – we’re the affordable home builders in Perth that first home buyers can count on. With Westgate Financial Services in-house, we can cut through the confusing financial jargon and find the loan that’s right for your budget so you won’t be hit by nasty surprises later on.
“And as the budget home builders Perth trusts, you know that you’re getting the best value for money in the market with Easystart Homes.”