When should you buy your first home?

Deciding when to take the plunge into homeownership is a significant milestone in anyone’s life. It’s not just a financial decision but one that impacts your lifestyle, career, and long-term goals. For many first-time homebuyers, the choice between saving up for a 20% deposit or borrowing a higher amount with a lower upfront cost can be challenging. So, when should you buy your first home? The answer varies and there are several factors to take into account.

Some key factors to consider:

Financial Stability – Assess your financial situation carefully

Buying a home is a long-term commitment, so it’s important to make sure you’re financially prepared. Ask yourself, do you have a stable income and enough savings for a down payment, closing costs, and ongoing homeownership expenses? 

It’s also important to consider the Lenders Mortgage Insurance (LMI) costs. Buying without a 20% deposit typically means paying LMI, which increases your monthly repayments. While this allows you to enter the market sooner, it’s essential to factor in this additional cost.

Capital Growth Benefits

Buying early can potentially allow you to benefit from market price rises and build equity through loan repayments, avoiding rental payments. This equity can later be leveraged for upgrades or investment opportunities.

Consider your future Career and Location goals

Are you settled in your career, or do you anticipate job changes or relocations in the near future? Buying a home ties you to a specific location, so consider your career prospects and long-term plans before making a decision. Think about how owning a home aligns with your future aspirations. Consider whether you prefer homeownership or are content with renting.

Rentvesting might be suitable if you love your current location but can’t afford to buy there. On the other hand, if you’re eager to own your own home and are willing to compromise on location, buying to live in might be the right choice. Evaluate factors such as your current living situation, expenses, savings rate, and anticipated income growth. Additionally, consider any future windfalls or partnership opportunities that may impact your decision.

Monitor Market Conditions

Stay informed about the real estate market in your area, watching for trends in home prices and mortgage interest rates. Opting to buy during a buyer’s market or when interest rates are low can lead to better deals and increased affordability. 

Additionally, if purchasing in your desired suburb seems out of reach, explore alternatives like rentvesting or starting with a smaller property to build equity. However, remember to still be aware of potential market fluctuations while saving. While waiting to accumulate a larger deposit can save on transaction costs, there’s a risk that the market may surge, making it harder to catch up with rising property values.

Personal Readiness

Homeownership comes with responsibilities like maintenance, repairs, and unexpected expenses. Are you ready for the added workload and financial obligations? Assess your readiness for homeownership both emotionally and mentally.

Ultimately, the decision to buy your first home should be based on careful consideration of your financial situation, career prospects, market conditions, personal readiness, and long-term goals. Take your time, do thorough research, and if you’re unsure, seeking advice and discussing your options with professionals can provide valuable insights. We understand it’s a significant decision, so take your time to weigh your options carefully, and consider getting in touch with one of our team members today – click here

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced, or republished without prior written consent. Content developed in partnership with IFPA.