Getting into the property market by buying your first home is a milestone and major life decision that most of us face. Buying a home is a emotional choice, that can begin with a large checklist then gradually shortened either by choice or force….force like “the budget”. Beware and avoid common mistakes and traps, to start your property ladder in the right direction with future horizon in mind.
FIRST HOME BUYER DILEMMA – Try out the poll next and see what applies to you and other first home buyers. Buying a home is often a personal and emotional decision. Give yourself the room to change your definition on the “dream home”, as life take you through twists and turns. The “dream home” in your 20s vs mid-30s vs mid-50 vs retirement is likely to be quite different from one stage to another.
CASE STUDY 1: Amy and Dan are a couple with double-income. They bought a $540k one-bedroom apartment in the inner-city suburb where they rented at $530 per week, as the location and the property ticks all the boxes. Sometime later, Amy and Dan falls pregnant. Amy is not likely to get back to work for at least two years – the alternative is to pay for day-care, which costs more or less what Amy usually earns. The 1-bed apartment is now too small for the family of three. While the combined income between Amy and Dan increases and fluctuate over the years, the expenses of a growing family and inflation grows even faster. Each time Dan and Amy upgrade their home (buy/sell/renovate) at progressive market value, they are likely to refinance for a bigger home loan with a payment term between 20-30 years. This means they are likely to carry a home loan into their senior years.
CASE STUDY 2: Sarah and David have a young family of 2 kids and bought a dream home at $1,56M at the auction. It is above what they originally budgeted for, but the emotions on the day took over. They managed to come up with the minimum 10% deposit to secure a home loan. The monthly repayment for a $1,404M home loan at 3.8% is about $4446 per week, interest-only. This puts enormous pressure on their household budget. Sarah and David will have to increase their pre-tax combined income by at least $90k, just to cover the cost of loan repayment and still enjoy the same lifestyle/cater for increase expenses with a growing family. They are considering a few options, including pulling kids out of private school education, spend more time at work way from family to increase earning, or possibly to sell the house and get something cheaper and further away from work/school/lifestyle.
Rest assure that most of us home-owners have gone through the same struggles that you have – you are not alone and you will get through it, one way or the other….but exactly which end of the scale will you come out of?
Majority of us continue to struggle between home loans, cost of living and the income that are never enough for everything that goes on in live. Some of us worked out smarter ways to navigate and build a better wealth portfolio along their life journey.
Find out what options are there for you – contact us for a strategic consultation appointment, before rushing into any decisions.