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¿ SORT YOUR FINANCES
How much do you spend each month?
What’s left over from your pay once you’ve
covered all of those living expenses? Are
there any non-essential items that you
can cut out?
Before even thinking about what sort
of property you could or should buy, it’s
worth ensuring you have an intimate
understanding of your financial profile,
according to Investors Choice Mortgages
founder Jane Slack-Smith.
“It’s incredible how many would-be first-
time buyers don’t know their budget,”
Slack-Smith says. “They haven’t sat
down and looked at all their incoming and
outgoing amounts, which means they
have no clue what they can reasonably
afford, how much money they can save
and in what areas they can cut back.”
When deciding that you’d like to buy
a property, the next logical step is to get
back to basics, she says. Go through
several months’ worth of bank statements
to see how you’re spending your money.
There are obvious bills and living costs,
and then there are things that aren’t
immediately obvious – nights out on the
town, your public transport expenses,
lunch each day and so on.
“You need a full audit of your expenses,
not just a rough idea of some of what you
spend,” Slack-Smith says.
At the very beginning, she suggests
making an appointment with a properly
qualified mortgage broker to talk about
your situation, current borrowing power
and ways to improve your standing with a
Christian Paterson is a broker with Loan
Market in Brisbane and says there are
many things to prepare from a finance
perspective and the sooner you can get
started, the better.
“The first thing I’d do is order a copy
of your credit history,” Paterson says.
“It’s free to obtain and you’ll know soon
enough if there’s anything on your record
to be concerned about.
“You might have a default listing for
$150 for a phone bill from a few years ago
and not even be aware of it. It’s worth
addressing any blemishes and working to
have them rectified before you approach
Another thing to keep in mind is that
banks are especially thorough in the post-
GFC climate. Anything of concern on your
bank statement could cause delays in
your loan assessment, he says.
Similarly, if you’ve got any credit
cards, Paterson suggests paying them
off, cutting them up and cancelling the
account as soon as possible. Even if you
pay down your balance at the end of every
month, a lender will consider your total
limit as a debt liability.
Slack-Smith says most lenders will want
to see proof of a decent savings history.
In many cases, the minimum period is six
months, although there are ways around
“Some lenders will consider regular
and on-time rent payments as a sign of
genuine savings, although it varies from
lender to lender and some are stricter than
others in that regard,” she says.
Sitting down early with a broker,
working out your anticipated budget for
a property and setting a deposit target
accordingly can help shape your savings
plan, Slack-Smith says.
In the current market where most
lenders want around 10 per cent of the
purchase price at least, it’s unlikely you’ll
have that much cash ready at hand. So,
it’s time to focus on that hurdle.
¿ BUILD A DEPOSIT
One of the biggest impediments to
getting on the property ladder is scraping
together a deposit big enough to satisfy
banks’ lending requirements, according
to Mortgage Choice spokesperson
“As prices continue to rise in most
capital city markets, the amount you need
to tip in is rising also,” she says.
The good news is that some lenders are
easing their requirements and beginning
to lend more and require a smaller
deposit, as post-GFC jitters start to fade.
“More lenders are lending up to 95
per cent of the purchase price but it’s
still encouraged that you have a higher
deposit,” Darnbrough says. “Plus, the
more you put in, the less you’ll have to
borrow and pay in interest.”
Many banks have first homebuyer-
specific loans and features, although
they’re not always the best bet, she says.
“A bank’s first-time buyer deal might
not necessarily be the best option for you.
Every case is different. That’s why it’s
best to speak to a broker about your needs
now as well as into the future.”
Regardless of the loan type and required
deposit, you’ll need to find some amount
of money to put towards the purchase.
Slack-Smith suggests looking for ways
to increase your income, whether it be by
babysitting for family and friends, doing
some freelance work in your professional
field, getting creative and starting your
own eBay business or hitting the markets
with secondhand goods of value.
If you’ve been putting in the hard
yards at work of late, it might also be
worthwhile hitting up your boss for a pay
rise, she says.
Paterson suggests having a think about
whether there’s anything of value you
can sacrifice towards the greater cause of
“I had a client recently who’s a triathlete
and she had a lot of specialist equipment,
namely a few bikes worth about $7000
each. She sold a few of those to get some
more cash together for her deposit.”
Similarly, if you’ve got a car but live
close to public transport, it might be
worth offloading the wheels and relying
on the bus or train for a year or two.
The Federal Government’s First Home
Saver Scheme could be another option
for aspiring property owners, Slack-
Smith says. Essentially it’s a program
to encourage first homebuyers to
accumulate a deposit for a home.
The money you put in each year is
matched with a 17 per cent government
contribution, so it’s a decent incentive to
save your pennies. There are a few rules
surrounding the account – you have to
make contributions in four financial years
before you can withdraw the cash to put it
towards a deposit.
If it’s realistic and feasible, consider
moving home with mum and dad for a
HOW FIRST-TIME BUYERS CAN
æYou need a full audit of your expenses, not just a rough
idea of some of what you spend.Æ Jane Slack-Smith
CRACKING THE MARKET \\ COVER STORY
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