5 Steps to home ownership for aspiring first home buyers
Man, 2020 was a challenging year, but the good news is, it’s done and as we race into 2021, it’s time to take control of your financial situation by setting near- as well as long-term goals.
No one can predict the future, but if you're worried about your capacity to buy a home because price are starting to trend upwards while your deposit saving remains stagnant, consider these 5 tips to achieve your first home dream;
1. Revisit your household budget
The economic fallout from the pandemic impacted most households balance sheets in 2020. Many experienced changing income situations due to job cuts or reduced employment, for some it was drastic and for other, minimal.
By taking a fresh look at your expenses from a need versus discretionary you can free up extra income. Think about expenses related to travel, day-care or babysitting, or eating breakfast or lunch out every day. What did you cut back on during 2020 and are you willing to do the same in 2021 in order to bolster your home deposit?
2. Set realistic goals
You're unlikely to get to your preferred financial destination without a plan you can stick to. Be realistic. It’s important that you set timelines for your goals, be it by years-end, next year or maybe you need a little bit longer — say, five years.
Undertake regular reviews of your financial situation and determine what needs to happen to achieve your home homeownership goals, and make adjustments where necessary.
3. Keep saving
Remember that market-shaking events like recessions are part of life, stay focused on your financial goals, especially if you want to buy a home within 12 – 24 months.
Shares can be volatile in the short term, so it’s may not be the wisest place to park your home deposit but in the past the market has always recovered from declines, so if your purchase time line is 3 – 5 years, there's no reason you can’t invest in shares with the help of qualified advice.
4. Get rid of short-term debt
Types of significant cost burden that’s particularly prevalent among millennials are car loans, credit cards and ‘BuyNowPayLater’ facilities.
If you are saving money for a home, it's an excellent time to eliminate or reduce these types of debt from your balance sheet and to use the extra cash to boost your home deposit.
5. Keep looking for opportunities
Unlike the last major economic disruption, the GFC, when decreased buyer demand (in retrospect it would have been a great time to buy a house) led to property prices to stagnate.
The pandemic on the other hand has led to deceased supply as seller hold on to their existing home. This is likely to introduce fierce competition among buyers, which in turn will drive property prices beyond most first home buyers budget.
With RBA indicating that interest rates are likely to remain low for a long time, consider moving faster when buying a house, start by getting a pre-approval in place through loansHub. Remember, there are always opportunities, you just need to be willing to take it when it presents itself.
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This article 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.