Buying a home shouldn’t be taken lightly. For most people, it is the biggest investment they will ever make and one that can cause significant anxiety. Whether you’re someone who buys and sells the family home every few years or buys with the intent of staying put for decades to come, there are four key points you should keep in mind before signing on the dotted line.
Make sure that you have your finances intact. Although common advice is to stretch yourself at the outset with a view to your salary increasing over time, it is important to act sensibly.
Consider whether you are willing to adopt a more budget conscious lifestyle in order to meet higher mortgage payments or whether you wish to maintain your pre mortgage spending habits.
Are your circumstances likely to change? If you are considering starting a family will you still be able to meet your commitments when on one salary?
2. Type of house:
You should have a picture in your mind of what you would like your home to look like. Do you want a 5 bedroom spacious home? 1 bedroom unit? A big yard for kids and dogs or a low maintenance lifestyle property? You should think about each aspect of the home, that way you will be able to narrow down your search and avoid having to move again in a few years when your housing needs might change.
Where do you want to live? Again, thinking carefully about this at the outset can avoid the necessity of moving again in a few years. Is your preferred area close to schools, transport, your social circle, place of work? Can you afford to live where you want to be?
4. Protecting Your Purchase
There’s no doubt that purchasing a home is a huge financial commitment and one that spreads over many years for most people. It is often triggers a return to work for a stay at home parent or increased working hours / commitments for others.The stresses associated with having a sizeable mortgage are significant.
The average Australian family spends 32% of their combined income on mortgage payments. Would you still be able to make your mortgage payments if one income was no longer there?
Many people choose to invest in Income Protection Insurance when purchasing a home as it allows peace of mind knowing that one’s income is protected against accident or illness. There are many variables associated with Income Protection and these will affect your premiums payable. It is important to consider for how long you could rely on your savings before you would be dependent on the regular monthly Income Protection payments. It is also crucial to consider whether you would need ongoing monthly Income Protection payments until your retirement age, or whether you would envisage only needing payments for a shorter length of time. Both of these factors will affect the premiums payable.