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Expert advice

May 15, 2012

The Sunday Times

With the leading banks running their own race on interest rates, it is as important as ever that you find a home that fits your budget, says Switch Homes for Living sales and marketing manager Lee Morris. I OFTEN hear first homebuyers saying they wont be able to break into the property market if mortgage affordability remains at current levels in WA. However, they do have control over their decisions and there are choices they can make to maximise the affordability of their mortgages. Affordability means the cost of the mortgage. Its about finding a new home and a piece of land that fits within your budget that is, the amount that you can borrow from your bank or financial institution. But, at the same time, you want your new home to increase in value over time, so you can eventually take the next step into something bigger and better. Given below are some tips for maximising the affordability of your new home in todays market without compromising on the quality of your investment. Is it really cheaper to rent? Do some sums and find out if you are paying a similar amount or even more than what you would pay for a mortgage. Rental costs are the highest they have ever been and the number of homes available for rent is the lowest it has ever been in the Perth metropolitan area. I recently heard of a real estate agency in Ellenbrook taking 55 applications for three homes on one weekend, with the landlords being offered, on average, $45 a week more than the asking rate so that the tenants could secure the property. The rental market is becoming even less affordable than the property market. Shop around for the right home loan. Use an independent broker to help you find the most suitable mortgage. They have access to a number of financial institutions and you dont have to pay them as they will be paid by the bank that gets your business. Consider a house and land package. You will often save significantly as builders and land sellers have combined forces to bring a product to the market, cutting out a number of costs you would normally encounter when putting your block and your new home together yourself. You can also be sure the home will be suitable for the lot size and shape, reducing the need to make changes to plans, which can cost money. Additionally, builders sometimes throw in bonuses and incentives to tempt you to buy a house and land package, such as painting, appliances or the cost of your stamp duty, all of which reduce the amount you need to borrow. Choose a development or estate that is relatively new with plenty of land for sale. The more you have in a development, whether its homes or facilities and infrastructure, the more it will cost for the land. So the trick is to buy in early and enjoy the benefits of watching land value increase as people start building and amenities appear. Choose a lot in a development that will have its own infrastructure, such as shops, schools and a community development plan. Your land will hold its value better if there is a quality community life around it, and it will be more enjoyable for you to live there as well. Think in terms of your life for the next few years rather than your home forever. Very few people stay in the home they build for more than six to 10 years. What will suit you in the near future? Can you get away with three bedrooms or a smaller lot size? You can choose a more affordable home product that will be a stepping stone to something grander.

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