It’s tough being a home buyer in this market. On one hand everyone is telling you that you have the upper hand - although it often doesn’t feel that way. On the other hand, some people will be quick to tell you that you’re a fool for buying because house prices are falling and the world as we know it is coming to an end! Buying a home isn’t easy at the best of times. There are a lot of crap overpriced houses out there, poorly-maintained houses, and 90s leakers. The one thing you learn from open homes is what grubby conditions some people live in! Many of our home buyers have been to upward of 60 open homes before they find something they like and then they’re competing with other home buyers for that same property. There are some bargains around but to secure one requires patience, detachment and clarity of purpose. I had clients buy in Onehunga recently, paying $385,000 for a house on a full site. It was an amazing deal, but those guys knew exactly what they wanted, and had negotiated on a number of properties before eventually securing one. If you’re buying in this market, then it’s more important than ever to do your homework . Over the past few years I’ve compiled a list of the top 10 tips for first home buyers. If you’ve already been shopping around, at least a few of these tips will be likely to ring true!
- Go hard and fast. In your first few weeks get out and see as many properties as you can. The faster you get an understanding for the market, the faster you’ll appreciate what a good property looks like and what you’re prepared to pay for it. Even in this market you need to move quickly if you stumble on a great buy.
- Be realistic. A number of first home buyers start their hunt looking at properties (and going to auctions) which are priced well above what they can afford. Eventually they get buyer fatigue and start looking in the right price range and areas.
- Be inquisitive. If a place is cheap (and looks good) it is usually because something is wrong with it. Do some basic checks yourself before paying to get a building inspection – look under the floor for dampness or rot and look for repairs. Is the property compliant with the building code?
- Check everything works. A building inspection will throw up structural issues with a house but will miss the small stuff. It pays to check that everything works – heated towel rails, spa pool, dish washer, dryer, drains, hot water, central heating, fans, and oven.
- Consciously appoint your advisers (broker/banker, lawyer, and building inspector.) Stop and think about it. If they aren’t the best then do something about it! Why leave one of your biggest financial decisions to chance?
- Make sure you can afford the mortgage. Banks will approve you for more than you can reasonably afford. It is important to have a realistic budget and to plan on higher interest rates. Putting your head in the sand simply creates problems later.
- Plan your mortgage properly. If you are going to have kids, travel overseas, go back to study, or join a hippie commune – work out what that means in advance. Planning your mortgage can make life easier in the future.
- Get independent advice. There are a large number of packages out in the market, with low equity fees to watch out for, and quite different lending criteria across banks. A mortgage broker can look at all of the options to make sure you get the best possible outcome. That might end up being your own bank, but at least a broker could present you with different options.
- Pay more than the minimum. If you pay the minimum you will not get ahead and your mortgage costs will increase when rates go up. Getting mortgage free in 10 or 15 years is easy if you are disciplined about it. Set goals and do something about it.
- Avoid consumer finance. Once you have a mortgage it gets harder to repay other debts. Although a hire purchase might be interest free (and you might absolutely needed it for your kitchen) at some point it needs to be repaid and will then impact on how easy it is to live with your mortgage.
Bonus tip: A home-and-income property can be a good way of leveraging yourself into a better suburb. It can lift your borrowing power by $150,000 to $200,000. It feels great to earn an income from your house!