You’ve dog-eared magazines, spent countless weekends at display villages and finally made the bold decision to build rather than buy a home. While choosing where and what to build are exciting and giant steps, you might not feel as enthusiastic about the necessary building contracts and approvals. But knowing your legal rights and responsibilities will help protect your investment and remove potential pain points in the construction process.
With fewer first buyers taking out home loans than a decade ago, one might have concerns for the future of the Great Australian Dream.
While affordability is squeezing high-demand capitals, such as Sydney and Melbourne, interest rates remain at record lows, continuing to give astute first-time buyers opportunities to purchase their piece of the property pie.
Just because you can’t afford what or where you want to buy first up, doesn’t mean you should forego property altogether. The longer you leave getting into the market, the harder it may become. Property prices may increase beyond your reach or the cost of living in general may climb, making it harder to save for a deposit.
While you may not be able to afford your dream home now, you can still take steps to help you afford it in the future.
Consider this: 30 years ago it cost about 3.5 times the average annual salary to buy an average priced Australian home — today, it costs around 7.5 times our yearly earnings 1. With the average new home loan nudging $444,0002, it’s more important than ever to look at strategies to shrink your mortgage and work towards greater financial freedom sooner.
The good news is interest rates are at record lows. The bad news is the average mortgage size in most Australian capitals has hit an all-time high. The challenge for many borrowers who are used to low rates could be keeping up with payments when rates inevitably rise. Those who want to get ahead will be taking steps now to make the most of low rates so they have a buffer down the track. But if you are already feeling weighed down by debt, it may be time to lighten the load.
If securing your first home, stepping up to something better or securing an investment property is on your to-do list for 2015 then it may be in your interest to maximise your borrowing power. Understanding how much you can borrow will help you make critical decisions, especially when it comes to what to buy and when.