We’re knee-deep in 2015, but changes that have occurred this year already may trail for another 30 years for those looking to enter the property market.
The favourable conditions are largely due to the cash rate falling after an 18-month slumber in February, and again in May to 2.0 per cent. While this has brought home loan interest rates down with it, it’s also fuelled the already-swelling property market and jacked house prices up a little more.
Since the drop of the cash rate, we have seen financial institutions offering record low interest rates, and while current interest rates are low, smaller lenders are tending to hold more sway in the finance market, with some offering a 3 year fixed rate for 3.99 per cent. This means homeowners have a golden opportunity to secure a low home loan rate and get stuck into paying it off.
So what are the key considerations 2015 holds for first home buyers?
- Property prices are rising: work out your financing options
Of 37 leading experts surveyed by home loan comparison sites in March, 34 expect this year to be one of rising house prices, while 22 expect the same or fewer first home buyers to be jumping into the property market . For those potential buyers out there, now is the time to work out if a range of financing options could get your deposit over the line, before prices rise even further.
Having a guarantor from a family member, capitalising Lenders Mortgage Insurance into your loan repayments or even sorting through alternative ways to fund your deposit are key decisions to make now.
- Learn exactly how home loan options work
Gone are the days of simply applying for a home loan with your family bank because “that’s just how it’s done”. You need to be aware of the features available to you if you’re going to survive the 30-year lifespan of what is, in reality, a debt amounting hundreds of thousands of dollars.
With variable rates at all-time lows, now is the prime time to get reading and learn how to pay off your mortgage quicker. For example, using an offset account to house your savings could end up shaving thousands of dollars off your loan in interest repayments – but you need to be across which options potential home loans have in order to take advantage of them.
Speak to a mortgage broker and get professional advice and guidance throughout the process. A mortgage broker does all the research for you and will help assess all of your options whereas banks are restricted y only being able to present one view. This can save you a lot of time and money and comes at no extra cost to you!
- Be strategic about location and building type
With all the commotion around rising house prices, you might be tempted to jump at some of the initial market offerings you find. This is a dangerous step, as it dilutes the very important point that every property you purchase should be an investment. In order to manage your housing investment efficiently, pick a property with valuable features such as a high ‘walk score’, room for renovation and in a high-yield area. Don’t just jump on the property bandwagon – get a front-row seat by doing your homework.
- Fuel your financial buffer
It’s up to you to not only be across your finances, but to actively contribute to the safety buffer that will act as a lifeline for your property. While there are a range of home loan features to make this easier, it all boils down to how money-smart you are, and learning where you’re bleeding dollars. Make regular savings, base your investments on optimal return and know when to draw the line on splurges.
While you might be about to embark on a new home-ownership journey, you’re also diving into considerable debt, and you’ll need to know how to manage that responsibility.
Should you have any questions with regard to lending, please do not hesitate to contact our lending specialist, Maria White.