Plan Before You Buy

Set you sights on the long term by being realistic in the immediate term. Look at what you can afford and make some compromises on what you want to get off to a sound financial start.

Compromise – Needs and wants
For those who do desire to become home owners, images of coming back to a welcoming home after a day at work, spending time with the family within the sanctity of its walls and pottering in the garden bring feelings of security and happiness. However, it can be tempting to want it all now, and with that desire comes the danger of over borrowing and getting into more debt than you can comfortably repay. It therefore pays to consider what your needs really are and what you would be willing to live without. For example, if you are part of a couple with no children and no need to work from home, could you live without a third bedroom and large garden? On the other hand, if you have a young family would you consider moving to an outer suburb for the extra space it would afford rather increasing an existing mortgage in order to maintain an inner city address? Make a list of the factors that are most important to you, taking into consideration the length of time you intend to live in the house and changes (such as starting a family) to your future circumstances. Making these choices will mean compromising on some things, but you will be better off making sacrifices now rather than struggling to make repayments later or finding there is no extra cash to take care of repairs or much needed renovations.

Setting a budget
Once you have decided on the type of home you need, it is helpful to set a budget. While the amount you can borrow will be limited by your earning capacity, assets and existing debts, lifestyle expenses and so on, do not make the mistake of using this amount as a price guide for your home. Your budget should also include hidden costs such as mortgage and building insurance, stamp duty, legal fees, searches and reports, furnishings and fittings, repairs, maintenance and council rates. Be aware that even high salary earners can and do lose their jobs, so do not use this factor alone determine the size of your mortgage. Take into account possible future lifestyle changes such as periods out of work, or moving from a double to a single income household with the arrival of a new family member. If you are making a first step into the property market you may have to accept that your first home will not be everything you dreamed of but remember that even the humblest of homes can be beautiful with a few personal touches. Your aim should be able to buy a home you can comfortably afford to repay over the long term with the goal of being debt free in the shortest possible time.

Your preferred area
Most people decide on a preferred area based on their budget and lifestyle. Others may have a few areas in mind, and are just waiting for the right property to come along. There are several factors to look out for in selecting the right location. Look at the vitality of the suburb: Is there a sense of community spirit? Are the recreational and sporting grounds maintained? Is the local council proactive in improving public facilities such as libraries, shopping centres and street scapes? Consider whether the area is safe or if there are known problems of drugs, violence, vandalism or other street crime. Paying more for the house where you will feel safe and happy is far more desirable than moving into an oppressive area. This is important for the sake of the house maintaining its value should you need to sell in a difficult market and is especially true if you intend to live in the home for many years. Buying cheaply when you do not like the home area is going to make you miserable in the long run and negate any of the benefits you had hoped for in savings. The right home should be more important than a cheap price unless you have the vision and personality to put up with less than desirable circumstances in order to accomplish a long term goal such as anticipating that an undesirable area will become ‘in vogue’.