Wherever you are in your property journey - buying your first home or building your investment portfolio - purchasing a property is likely to be part of a strategy to grow your wealth over time and achieve financial prosperity and security. However, a common trap people can fall into when buying property, is simply not thinking long-term.
While we've seen property values grow very quickly in past decades, property is not always a short-term investment. Here are our top tips for purchasing your home with your future in mind.
1. Location, location, location!
Whether the ultimate aim is to get into the market as a first time home buyer, building your nest egg or finding your ‘forever’ home, where you decide to buy is key.
North of the river or south of the river? An established suburb or a new development? Location is a major factor that can contribute towards determining how much your property will increase (or decrease) in value over time, so it's one of the most important things to research thoroughly before you buy. For example, are there any future public transport networks planned? Or other developments in the area that may impact the value of your home.
It could pay to think outside of the box as well and not just consider the suburbs you are already familiar with. You might be surprised to find other more affordable suburbs that tick all the boxes or offer better amenities, such as schools and childcare facilities, shops, recreational, dining and entertainment options or that have historical values trends.
According to the Real Estate Institute of Western Australia (REIWA), one way to make an informed decision is to look at town planning proposals and see if there are any exciting developments on the horizon that could positively impact future property prices.
2. Think about your future needs
Even if your first home isn't the property of your dreams to start with, it's still wise to approach it as a long-term purchase and think about your lifestyle needs now and in the future. One approach you may find helpful is to create a checklist, so you can inspect properties that ‘tick all the boxes’.
Some questions to ask yourself are:
- Do you need to be close to your work or job opportunities?
- Will your family be growing and will you need more space?
- Do you need to think about nearby schools?
- Will you need outdoor living space?
- Are you planning to earn rental income from the property?
- Will you incur more travel costs?
3. Expect the unexpected
It's difficult to predict when repairs and maintenance issues may come up, periods of vacancy when leasing a property or interest rate rises but you can give yourself a buffer of savings to cover circumstances beyond your control. Don't underestimate the importance of insurance on your mortgage - known as Mortgage Protection Insurance - to protect you and your family against unforeseen changes.
An important question to ask yourself is "what would happen if I could no longer afford to make my loan repayments because I lost my job, suffered a serious illness or injury, or were to pass away?". Not to be confused with Lender's Mortgage Insurance (LMI) or home and contents insurance, Mortgage Protection Insurance is about ensuring that your repayments are covered for these reasons. Other types of insurance of available - such as life insurance - so ensure you've done your research and compared all your options before committing to a purchase.
It may also be worthwhile thinking about setting up your own emergency fund. Learn more about what it is and how to get starting saving one.
4. Have a realistic budget
Before you start your property search, you will need to know not only how much you can borrow but how much you can afford. Falling into the trap of over-commitment could cause problems later, so make sure you budget accurately and realistically.
Use our home loan repayment calculator to help you understand what your repayments will be on different loans and with different interest rates. Take into account the repayments you can manage without impacting your lifestyle and other commitments. It is not just the home loan you are budgeting for – you also need to allow for costs such as home and contents insurance, stamp duty, settlement fees and council rates.
If you are ready to take the next step, a P&N Bank home loan specialist can talk to you and give you more home loan tips, advice on how to apply for a home loan and answer any questions you may have. Contact us today so we can help you get the most from your home loan.
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