6 Mistakes first time property buyers should avoid

Mistakes are part and parcel of life and we should see them as opportunities to learn valuable lessons, however, when it comes to buying property, mistakes can prove to be very costly.

So much so that they can often prevent Australians from getting past owning one single property. What are some of the mistakes you can avoid when buying property?

1. Buying for today and not the future

This mistake is common among first time buyers who don’t understand the type of dwelling or the locations that have a history of outperforming the averages. Instead, they buy an inferior property in a second-rate location that will always struggle to grow in value.

2. Relying on armchair experts

While advice from our family and friends is always well-meaning, unless they have bought and sold properties successfully, their opinion should never become your strategy.

Remember, there are around 25 million property experts in Australia and on the whole their free advice can become very costly indeed.

3. Not knowing your borrowing capacity

You thinking that you can afford a property is different to a bank actually lending you that money. Many borrowers use a generic borrowing power calculator to confirm how much they can borrow.

Most of them are surprised when on applying for a loan with a bank, they are told that their borrowing capacity is lot lower that what the generic tool showed them

4. Paying above benchmark

A simple mistake for novice buyers is paying too much for their property, especially when buying at auction or FOMO sets in.

By overspending, they will likely create cash flow issues for themselves (paying more stamp duty and extra interest for years) as well as have to wait longer for any decent capital growth.

5. Misunderstanding all the costs

Everyone knows that property buying is expensive, but newbies often don’t factor in the additional buying costs such as stamp duty (if property value doesn’t qualify for a first home buyer exemption), body corporation fees (if buying in a strata), insurance, council rates and maintenance.

6. Failing to review their home loan

Far too many property buyers adopt a “set and forget” attitude once their home loan settles, when they should have a “set and review” mindset.

According to a 2020 report by the ACCC, 3 out of 4 Australian mortgage holders are losing up to $5,000 annually, after being with their lender for 1 year due to difference in discount rates being offered to new borrowers compared to what they received on application.

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This article via Property Insider does not constitute advice; readers should seek independent and personalised counsel from a trusted adviser that specialises in property, a tax accountant and property design specialist.