8 Common mistakes of first-time property buyers

You’ve scrimped and saved up a healthy deposit for a home and you’re ready to take your first step on the property ladder. But before you do, you’ll want to make sure you’re taking the right steps.

Here are 8 common mistakes of first-time property buyers, and how you can avoid them.

 

1. Taking on too much debt

One of the biggest mistakes a first home buyer can make is taking on more debt than their budget can comfortably handle. While a lender will assess the home loan applicant(s) income, expenses and dependents, it is still up to the borrower to decide whether they’re comfortable taking on that much debt.

Generally, if your home loan repayments exceed 30 per cent of your income you’re considered to be in “mortgage stress”. Just because you can afford bigger repayments doesn’t mean it’s the healthiest path to take for your finances. If you’re no longer able to save and find yourself pinching every penny because of your home loan, you may have taken on too much debt.

 

2. Choosing a high rate mortgage

Another common trap first home buyers fall into is not doing their due diligence and accepting the first high rate mortgage offered to them. This is not uncommon with borrowers who stick with the same bank they’ve been with their whole lives.

First home buyers may end up paying thousands more in interest repayments by not researching what low rate options are out there. Reduce Home Loans has consistently been a leading low rate lender for first home buyers in Australia since its inception. With rates sitting under the 2 per cent mark, why not compare low rate first home buyer loans today.

 

3. Looking at costly suburbs

If your heart is set on buying your first property in your dream suburb, you may find yourself priced out of the market or taking on greater mortgage debt than you can handle. This is why it’s often recommended that first home buyers consider other “bridesmaid” suburbs around their dream suburb when buying their first property.

After all, it’s called a property ladder for a reason. You’re supposed to climb it until you can comfortably afford your dream home in your ideal, more-costly suburb.

 

4. Not looking around the neighbourhood

Even if you’re looking in other suburbs, another common mistake first home buyers can make is looking only at the house and not the neighbourhood itself.

What is the property’s distance to public transport? How easily can the household inhabitants easily reach their workplace? What are the property values of the neighbouring houses and are they on the rise or decline? If you have, or are planning on starting a family, is it close to good schools? What is the community like? What green spaces are there, such as parks, and how easily can you access them from the property?

There are a multitude of questions first time property buyers should be asking themselves about the neighbourhood before they commit to a home.

 

5. Overlooking professional inspections

Just because a current owner or real estate agent has paid for a professional inspection, doesn’t mean you don’t have to as well. This is a very common mistake that can cost first time buyers dearly in repairs.

First time buyers will want to contact an independent (and well-reviewed) professional to inspect their potential property – and one that has not been recommended by the real estate agent. A building inspector will be honest and give you a realistic breakdown of faults existing in the property.

Minor faults may be easily fixed, but major ones will influence the true cost of the property you purchase. If you’re sinking a few extra tens of thousands or even hundreds of thousands of dollars into the property because of major faults, you may want to look elsewhere. This is why professional, independent inspections are invaluable for first time buyers.

 

6. Heart over head

While you want to love the property you’re buying, you don’t want this emotion to completely drive the sale. First time buyers need to keep a level head throughout the whole home buying application.

If there are issues that arise with the property, you don’t want to overlook these just because of your emotions. Also, it’s still a deal after all, and if the real estate or owner suspects you feel this way then they ultimately will have more bargaining power in the sale itself.

 

7. Neglecting additional costs

It’s not just a deposit you need to save for to get your first property. You also need to factor in additional, upfront costs.

These may include:

  • Stamp duty (depending on your state or territory)
  • Lenders mortgage insurance (LMI)
  • Solicitor costs
  • Conveyancing costs
  • Building and pest inspections
  • Removalist costs (if living in a new property)
  • Home and contents insurance

 

8. Advice from family and friends

It’s not uncommon to receive an inundation of advice from family and friends when buying your first property. But problems can arise when you only take the advice of family and friends.

There are a range of resources available for first home buyers to help them learn about not only the buying process but also the home loan process too. A mortgage broker can be a great help in the mortgage process, but they also have industry knowledge of the property market.

 

Home loan guides and calculators can also be a handy tool for first home buyers. Calculate how much you may be able to borrow on a home loan through a borrowing power calculator, and work out how big a mortgage your budget can handle through a mortgage repayment calculator.

 

Any statement/s are general in nature and do not take into account your financial personal situation, objectives or needs. You should consider whether any statement/s is suitable for you and your personal circumstances. Before making any financial decision, consider your circumstances and the product disclosure statement.

 

(29)    For the Rate Cutter Variable where the borrower pays $1170 upfront fees then a corresponding loyalty discount of 0.10% p.a. off the Rate Cutter Variable (at that time)  will automatically apply after the 5th anniversary of the loan.  These fees and loyalty discount are factored into the comparison rate.  The loan setup fees are not refundable.

(27)    For the Investor Rate Slasher Cash Back Variable where the borrower pays $0 upfront fees then a corresponding loyalty discount of 0.06% p.a. off the Investor Rate Slasher Cash Back Variable (at that time)  will automatically apply after the 5th anniversary of the loan.  These fees and loyalty discount are factored into the comparison rate.  The loan setup fees are not refundable.

(26)    For the Low Rider Cash Back Variable where the borrower pays $0 upfront fees then a corresponding loyalty discount of 0.06% p.a. off the Low Rider Cash Back Variable (at that time)  will automatically apply after the 5th anniversary of the loan.  These fees and loyalty discount are factored into the comparison rate.  The loan setup fees are not refundable.

(25)    For the Economizer Cash Back Variable where the borrower pays an upfront fee of $697 then a corresponding loyalty discount of 0.08% p.a. off the Economizer Cash Back Variable (at that time)  will automatically apply after the 5th anniversary of the loan.  These fees and loyalty discount are factored into the comparison rate.  The loan setup fees are not refundable.

(24)    For the Super Saver Cash Back Variable where the borrower pays an upfront fee of $697 then a corresponding loyalty discount of 0.10% p.a. off the Super Saver Cash Back Variable (at that time)  will automatically apply after the 5th anniversary of the loan.  These fees and loyalty discount are factored into the comparison rate.  The loan setup fees are not refundable.

(23)    For the Super Saver Variable where the borrower pays an upfront fee of $1170 then a corresponding loyalty discount of 0.15% p.a. off the Super Saver Variable (at that time)  will automatically apply after the 5th anniversary of the loan.  These fees and loyalty discount are factored into the comparison rate.  The loan setup fees are not refundable.

(22)    For the Economizer Variable where the borrower pays an upfront fee of $1,170 then a corresponding loyalty discount of 0.11% p.a. off the Economizer Variable (at that time)  will automatically apply after the 5th anniversary of the loan.  These fees and loyalty discount are factored into the comparison rate.  The loan setup fees are not refundable.

(21)    For the Investor Cash Back Hero Variable where the borrower pays an upfront fee of $697 then a corresponding loyalty discount of 0.08% p.a. off the Cash Back Hero Variable (at that time)  will automatically apply after the 5th anniversary of the loan.  These fees and loyalty discount are factored into the comparison rate.  The loan setup fees are not refundable.

(18)    For the Home Owners Dream 1 year fixed where the borrower pays an upfront fee of $697 then a corresponding loyalty discount of 0.20% p.a. off the Home Owners Dream reverted variable rate (at that time)  will automatically apply after the 5th anniversary of the loan.  These fees and loyalty discount are factored into the comparison rate.  The loan setup fees are not refundable.

(20)    For the Cash Back Hero Variable where the borrower pays an upfront fee of $697 then a corresponding loyalty discount of 0.08% p.a. off the Cash Back Hero Variable (at that time)  will automatically apply after the 5th anniversary of the loan.  These fees and loyalty discount are factored into the comparison rate.  The loan setup fees are not refundable.

(14)   For the Investor Rate Slasher where the borrower pays an upfront fee of $1,170 then a corresponding loyalty discount of 0.09% p.a. off the Investor Rate Slasher rate (at that time)  will automatically apply after the 5th anniversary of the loan.  These fees and loyalty discount are factored into the comparison rate.  The loan setup fees are not refundable.

(12)   For the Investor Rate Lovers Interest Only where the borrower pays an upfront fee of $697 then a corresponding loyalty discount of 0.07% p.a. off the Investor Rate Lovers Interest Only rate (at that time)  will automatically apply after the 5th anniversary of the loan.  These fees and loyalty discount are factored into the comparison rate.  The loan setup fees are not refundable.

(11)   For the Wealth Maximizer 3 year fixed Principal & Interest where the borrower pays an upfront fee of $697 then a corresponding loyalty discount of 0.20% p.a. off the Wealth Maximizer reverted variable rate (at that time)  will automatically apply after the 5th anniversary of the loan.  These fees and loyalty discount are factored into the comparison rate.  The loan setup fees are not refundable.

(10)    For the Wealth Maximizer 2 year fixed where the borrower pays an upfront fee of $697 then a corresponding loyalty discount of 0.20% p.a. off the Wealth Maximizer reverted variable rate (at that time)  will automatically apply after the 5th anniversary of the loan.  These fees and loyalty discount are factored into the comparison rate.  The loan setup fees are not refundable.

(9)    For the Home Owners Dream 3 year fixed where the borrower pays an upfront fee of $697 then a corresponding loyalty discount of 0.20% p.a. off the Home Owners Dream reverted variable rate (at that time)  will automatically apply after the 5th anniversary of the loan.  These fees and loyalty discount are factored into the comparison rate.  The loan setup fees are not refundable.

(8)    For the Home Owners Dream 2 year fixed where the borrower pays an upfront fee of $697 then a corresponding loyalty discount of 0.20% p.a. off the Home Owners Dream reverted variable rate (at that time)  will automatically apply after the 5th anniversary of the loan.  These fees and loyalty discount are factored into the comparison rate.  The loan setup fees are not refundable.

(7)    For the Investor Rate Slasher where the borrower pays an upfront fee of $1,170 then a corresponding loyalty discount of 0.09% p.a. off the Investor Rate Slasher rate (at that time)  will automatically apply after the 5th anniversary of the loan.  These fees and loyalty discount are factored into the comparison rate.  The loan setup fees are not refundable.

(6)    For the Investor Rate Buster Variable where the borrower pays an upfront fee of $697 then a corresponding loyalty discount of 0.08% p.a. off the Investor Rate Buster Variable rate (at that time)  will automatically apply after the 5th anniversary of the loan.  These fees and loyalty discount are factored into the comparison rate.  The loan setup fees are not refundable.

(5)    For the Rate Buster Variable where the borrower pays an upfront fee of $150 then a corresponding loyalty discount of 0.05% p.a. off the Rate Buster Variable rate (at that time)  will automatically apply after the 5th anniversary of the loan.  These fees and loyalty discount are factored into the comparison rate.  The loan setup fees are not refundable.

(4)For the Rate Slasher Variable where the borrower pays an upfront fee of $1,170 then a corresponding loyalty discount of 0.08% p.a. off the Rate Slasher Variable rate (at that time) will automatically apply after the 5th anniversary of the loan. These fees and loyalty discount are factored into the comparison rate. The loan setup fees are not refundable.

(3) For the Investor Rate Lovers Variable where the borrower pays $0 upfront fees then a corresponding loyalty discount of 0.06% p.a. off the Investor Rate Lovers Variable rate (at that time) will automatically apply after the 5th anniversary of the loan. These fees and loyalty discount are factored into the comparison rate.  The loan setup fees are not refundable.

(2)For the Rate Lovers Variable where the borrower pays $0 upfront fees then a corresponding loyalty discount of 0.06% p.a. off the Rate Lovers Variable rate (at that time)  will automatically apply after the 5th anniversary of the loan.  These fees and loyalty discount are factored into the comparison rate.  The loan setup fees are not refundable.

(1) For the Low Rider Variable where the borrower pays $0 upfront fees then a corresponding loyalty discount of 0.06% p.a. off the Low Rider Variable rate (at that time) will automatically apply after the 5th anniversary of the loan. These fees and loyalty discount are factored into the comparison rate. The loan setup fees are not refundable.

(28) For the Rate Crusher 1 Year Fixed where the borrower pays an upfront fee of $697 then a corresponding loyalty discount of 0.05% p.a. off the Rate Crusher reverted variable rate (at that time) will automatically apply after the 5th anniversary of the loan. These fees and loyalty discount are factored into the comparison rate. The loan setup fees are not refundable.

(19) For the 1 Year Fixed Wealth Maximizer where the borrower pays an upfront fee of $697 then a corresponding loyalty discount of 0.20% p.a. off the 1 Year Fixed Wealth Maximizer reverted variable rate (at that time) will automatically apply after the 5th anniversary of the loan. These fees and loyalty discount are factored into the comparison rate. The loan setup fees are not refundable.