Buying property is a major decision that requires careful consideration and planning.
In this blog, we’ll explore some of the key factors that can indicate whether you’re ready to enter the market.
Your financial health
One of the most critical factors in determining when’s the best time to buy a house is your financial health.
Here are some questions to consider:
- Do you have a stable income and job security? Many lenders want you to have a steady job with a regular income when they assess your ability to pay back a home loan.
- Have you saved enough for a deposit and associated costs? The standard home loan deposit in Australia is 20%, though it is possible to get approved with a smaller deposit (though you may need to pay lender’s mortgage insurance). Besides the deposit, you also need to save for additional costs, such as stamp duty, legal fees and other associated expenses of buying property.
- What’s your credit score? A good credit score boosts your chances of home loan approval and gives you access to better interest rates and terms. So if you’re thinking of buying, it’s generally a good idea to get a copy of your credit report in the months leading up to your home loan application. That way, you have time to address any issues you may find.
Your borrowing power
You want to make sure you can comfortably afford to pay back a mortgage without stretching your finances too thinly.
Use a home loan calculator to work out your potential mortgage repayments and borrowing power.
Remember to plan for ongoing expenses, such as utilities, insurance, maintenance costs, repairs and strata fees if applicable. You want to make sure your budget can accommodate these without causing financial strain.
Your personal readiness
The question of ‘When’s the best time to buy a house?’ doesn’t just come down to financial considerations; personal readiness is equally important.
So consider your plans for the next few years —are you ready to settle down and establish roots in a specific area? If you anticipate significant life changes, such as geographical or career switches, it might be wise to wait before committing to homeownership.
Alternatively, rentvesting could be a way of getting on the property ladder while retaining the flexibility you need.
Rentvesting is a home-owning strategy in which you rent a property to live in that’s right for your lifestyle while investing in real estate elsewhere.
Signs that you are not ready to buy
While many Australians dream of owning their own home, there are certain signs that suggest you might not be ready just yet. These include:
- Poor credit history: If you have a low credit score, it can lead to higher interest rates or even loan rejection. So focus on improving your credit score before attempting to buy property, if possible.
- Irregular income: Most lenders want you to have a stable source of income to ensure you can meet mortgage repayments consistently. If you’re uncertain about your job or planning significant career changes, it might be better to wait until you have more security.
- Uncertain long-term plans: If you’re unsure about settling down in a particular area or plan to travel extensively, homeownership might not suit your current lifestyle.
- Unstable finances: If you’re struggling to manage your current financial obligations and find it challenging to budget effectively, it may be a sign you’re not ready to buy property.
Looking to break into the market? Shore Financial can help. To discuss your options, call us on 1300 416 700, email us on firstname.lastname@example.org or fill in this online form.