So, you think you can’t buy?

There is nothing to stop a young person from jumping on the property ladder, including if they fall in the age range of the millennial, which is generally accepted as between 21 year and 39 years of age in 2021. Here’s what they can do –

The mortgage

• First up, ask yourself ‘How much of my weekly/monthly income can I realistically put towards paying off a mortgage? Experts suggest if you are spending more than 30 per cent of your pre-tax monthly income on mortgage payments, you might be putting yourself at risk of ‘mortgage stress, which is very real. Mortgage stress looks and feels different to different people. Mild stress can come in the form of worrying about meeting future repayments. Extreme stress might mean using credit cards, savings or equity to meeting mortgage repayments, or skipping repayments altogether. Seeing exactly where you spend your money each month will give you an idea on how much you can dedicate to monthly loan repayments.

The deposit

• Saving for a deposit is challenging for most first-time buyers. It can take a very long time and put a lot of pleasant things out of your reach while you are trying to save.  Clear goals and a willingness to make sacrifices are necessary. Try budgeting before you buy. Review your bank statements and bills for at least three months and determine how much you are spending on everything from utilities to school fees, groceries to transport, and so on, PLUS how much you will spend on mortgage repayments. Audit your finances and account for each dollar that comes in and out of your household. You may find ways to reduce spending on non-essentials and re-direct this toward your mortgage repayments. It is generally easier to save for that deposit when you have a secure job, but you also need to know you can afford to make the monthly repayments and cover the costs associated with owning a home along with your daily living expenses. If you believe you can do this, there is a very good chance you are ready.

Plan for rate rises

• The worse thing to do right now is to over-extend based on historically low interest rates. Figure in rising interest rates or mortgage stress may become a reality for you.

Be informed

• Don’t wait for a property market ‘crash’. It is unlikely to happen tomorrow, next month or even next year. Be as informed as possible about the market and the myriad of legal and administrative matters that buying a home entails. Research the area you want to buy in, talk with agents, check out properties that have sold and that are currently on the market, attend auctions – do everything you can to put you in the best decision-making position.

Get pre-approval

• Informed and ready buyers tend to have pre-approved finance. This determines early in the buying process, just how much you can borrow. It provides certainty that you are being realistic with your expectations and are looking in the right market. By having pre-approval, and therefore knowing roughly how much you can borrow, you can determine likely repayments and plan how you will budget.

There is government help available. This includes the federal government’s First Home Loan Deposit Scheme, which lets first home buyers purchase a home with a five per cent deposit. States and territories also have assistance schemes.

SOURCE: RE/MAX Australia