With interest rates at historical lows, now looks like a good time to buy a house. But are you ready for the commitment? Consider this checklist before you decide to buy.
1. Are you in a good financial position?
Before you start checking out property for sale, make sure your finances are in good shape.
Have you got enough saved for a deposit? Normally, this is can be up to 20% of the cost of the house. But there are also lenders who may give you up to 95% of the house price, as long as you have a stable employment history and can show you’re capable of paying your bills and debts on time. But remember, if you choose this option, you’ll also have to face the additional cost of taking out lenders mortgage insurance.
Before you buy a house, work out if your income will cope with regular mortgage payments on top of other living expenses. Factor in any other debts you’re paying off too, such as credit cards or personal loans.
2. Are you ready to settle?
Buying a house is not only a huge financial decision — it also means a commitment to staying in one place for a while (unless of course you plan to rent out the house). So before you buy, make sure you’re happy to stay in the same place for at least 3–5 years.
3. Where do you want to buy?
Once you have your finances worked out you’ll need to check the cost of housing in the area you’ve got your heart set on.
Recent figures from the Australian Bureau of Statistics show that house prices continued to rise in all capital cities except Hobart in the June quarter of 2013, with prices in Darwin, Sydney and Perth rising the most. However, house prices do fluctuate regularly, and of course, there are always bargains to be found.1
It’s a good idea to check out the area you’re interested in and see the average price that homes are going for. It’s also wise to have a number of areas in mind in case you can’t find what you’re looking for in the neighbourhood of your choice.
4. What are mortgage rates like?
Recent rate cuts by the Reserve Bank of Australia mean the country’s official cash rate is now at a record low. And because banks have passed on many of these cuts to their home loan customers, mortgage rates are also low. But be sure to work out if you’ll still be able to make your loan repayments when these rates eventually rise again. Also bear in mind those periods of low interest rates tend to stimulate the market generally, meaning that there is a higher likelihood of other buyers competing for the properties you are interested in and you may be forced to pay a higher price than you otherwise would as a result.
5. Are your finances protected?
Buying a house is one of the biggest commitments you’ll ever make. So protect yourself and your family by safeguarding your income with insurance.
For example, you might decide to take out income protection insurance, which generally covers up to 75% of your pre-tax salary if you can’t work for a while due to illness or injury. Life insurance, which pays your family a lump sum if you die or become terminally ill, is also worth considering.
Whatever insurance you decide to buy, you should consider comparing different companies and policies to get the best deal for your budget and lifestyle.
This information is general in nature and does not consider your financial situation.
- Australian Bureau of Statistics, House Price Indexes: Eight Capital Cities, Jun 2013.
This is general information only and does not take into
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