How to stand out as a homebuyer

Buying a home isn’t easy.  Here are some tips to make sure you stand out and aren’t continually pipped at the post by more motivated buyers.

1. Get pre-approved for your loan.  Alongside the obvious benefits such as knowing exactly your maximum spend, being pre-approved is a signal to the vendor and agent that you know what you’re doing and you’re ready to go.  This can encourage a seller to negotiate in good faith and to take you seriously.

2. Make an offer.  Even though a property might be scheduled for auction, making a realistic offer can sometimes be enough to tempt a seller to sell prior to auction, especially if the sales campaign has been slower than expected.  Never underestimate that selling is just as stressful as buying, and a nervous seller might jump at your offer.

3. Offer flexibility.  Does the seller want a movable settlement date?  Do they want to be able to rent it back for a short period of time?  Being flexible on these types of requests might put your nose in front of other buyers.

4. Use a buyer’s agent.  Having a dedicated and professional advocate representing you can give you market knowledge, negotiating power, access to off market listings, and a calm and steady presence.  A buyer’s agent can leverage their relationships with sales agents to give the inside lane on finding a negotiating on a property.

Standing out as a buyer is all about showing that you’re serious, flexible, and financially secure. These qualities make sellers feel confident that the transaction will go smoothly and quickly, which can be the deciding factor in competitive situations.

How your spending habits affect your borrowing ability

Figuring out how much you can borrow for a home loan isn't just you telling the bank you can afford the repayments. It's a detailed process where every aspect of your financial life can be scrutinised. They'll want to know all the standard stuff about you like your household income, and other income such as rental or investment. But there's more to the equation than just the basics.

Your existing debts play a crucial role. Car loans, buy-now-pay-later, HECS, credit cards… these will all chip away at your maximum borrowing power. Credit cards in particular can bring your maximum down. Lenders will look at the card limits – not the balance – when assessing your borrowing power.

If you have non-mortgage debt and are thinking about a home loan you can consider paying down your debts and reducing credit card limits or closing credit cards. Speak to us first – if you’re using your saved deposit to close other credit you want to make sure you don’t leave yourself short.

What about my Uber Eats addiction?

Yes, banks care about how you spend. Particularly if you have a smaller deposit, the lender will want to see your spending habits to make sure you aren’t putting half your pay on race 4 at Flemington every Saturday. If you’re an Uber Eats fan and have excessive transactions on your statement this could hint to the lender that you aren’t super responsible with your spending. It’s beneficial to your bank statement regularly to see where your money is going. Uber Eats, Afterpay, Streaming Services, and eating out can quietly accumulate over time. Even if you aren’t applying for a loan, reviewing your spending is a good financial habit to be in.

In the end, getting a mortgage isn't just about numbers on a page. Part of it is proving to the bank that you're financially responsible and ready to take on the challenge. So, get wise, tighten your budget, and talk to us for advice on how to get into your home sooner.

How to pay off your home loan faster

Paying off your mortgage early is the dream of everyone with a home loan.  Paying off early will saving you money, and the removal of one of the largest financial burdens we face will bring great relief to you and your family.  Here are some ways to get rid of your mortgage sooner.

1. Switching to fortnightly payments of half your monthly repayment will mean you make an extra repayment each year (as each year as 26 fortnights).

2. Linking an offset account can have a massive impact. An offset with a healthy balance can save thousands in interest which reduces the time to pay off.

3. Cutting back on expenses (if you can!) means you can direct more money to the mortgage.

4. Make extra payments. Tax returns, bonuses, flogging your unwanted garden tools on Marketplace... it all adds up.

5. Making higher repayments than the minimum repayment will all add up over time.

6. Switch to a loan with a lower interest rate, but keep your repayments at the higher amount.

If you would like to know more about how to optimise your finances to pay off your mortgage sooner please get in touch!

Guaranteeing your child's loan

Being a guarantor generally means using the equity in your own property as security for your child’s home loan. It can help a first-home buyer to secure finance for a property they can afford but may not have a large enough deposit for, and to avoid the added cost of lenders mortgage insurance.

There are other advantages as well. By guaranteeing a loan, you’re helping your child enter the property market sooner.  Also, your child may be able to buy in a more desirable location and a home that better suits their needs. If they did it on their own, they may need to go further out of the city or perhaps settle for fewer bedrooms.

You may want to help your child but it’s important you don’t go into the transaction blindly.

The main risk of guaranteeing the loan is that, depending on the structure of the guarantee, you could be liable should your child default on the payments, either by taking over the repayment schedule or handing over a full repayment.

If you can’t make the payments, the lender may sell the home used as security. If this is still not enough, the lender may also require you to sell assets to meet outstanding debt.

Another major risk is a bad credit rating if default occurs.

Plus, if you need to borrow money for another purpose, your property cannot be used. If for instance you want to buy an investment property, you can’t use the equity in your home because it’s already tied up in the child’s loan.   

There are ways to minimise the risks. The most common is using a monetary gift or private loan. This involves borrowing money against your property in your name, and then gifting it to your child.  It is wise to have a legal agreement in place.

Another way to avoid the risk is to buy the property jointly with your child. This means your name is on the title and you have a certain percentage entitlement.

Finally, outline an exit strategy. Financial situations change and, as the loan decreases with repayments, there may be an opportunity for you to withdraw your support to free up your assets without impacting your child’s loan.

Five things first-home buyers need to know

Before you decide to purchase your first property there are a number of things to consider, including your current personal circumstances and financial status.

1. Think about why you want to buy a home

Do you want to live in it or will it be an investment property? This can help determine the kind of loan you apply for and home you buy, depending on your short and long-term plans.  

2. Research potential properties and loans

Knowing the market is crucial, so do some research on the areas you are targeting.  Check out auction clearance rates and recent sales, as well as price trends in the area. Once you are aware of what you are looking for and the approximate price, the next step is saving a deposit.

While some lenders will offer loans if you have saved less than the usual 20 per cent deposit, being able to show a record of good saving habits will aid in getting your loan approved.

Then, when you talk to us about applying for pre-approval on the right type of loan, we can help to work out what you can afford in terms of repayments.

3. Factor in other costs involved

Depending on the property, there are usually a number of additional costs that you'll need to factor in. This can include, but isn’t limited to, stamp duty, loan establishment fees, legal and conveyance services, utilities, property insurance, maintenance and lenders mortgage insurance.  There are some first home owner grants and tax and duty concessions for first home buyers that you might be eligible for.  Speak to us about what other payments you will face and what concessions you might be able to get.

4. Think about your future

Just because your current situation allows you to get a home loan, that doesn’t automatically guarantee that you will still be able to service it in five years’ time. Is there a possibility your role at work will change? Are you considering going back to study and reducing your working hours?

5. Get professional help

With so many things to consider, getting professional help is highly recommended. We can help you to connect with the expert people for tasks such as property checks, pest checks and any legal queries. Going it alone can prove costly. Avoid nasty surprises down the track by getting the right people to do the appropriate checks for you from the beginning.

Get in touch with us at Blackwattle Finance for great advice about buying your first home.