Six Common Misconceptions About Financing Your First Home
1. “I need a large deposit to get into the market”!
It is true that you need some form of deposit or down payment to break into the property market but it may not be as much as you think. There are loans available for as low as 1% of the purchase price as a deposit currently available. Another option to consider is a “family guarantee” which is bank talk for your parents providing a portion of their property as a guarantee or security in place of a deposit for your first home purchase.
2. “I won’t be able to afford the repayments”!
The current market (August 2013) is in a part of the economic, interest rate and property cycle where it is possible to purchase your first home in certain areas for the same or very close to what you would pay in rent for an equivalent house. This is a unique window of opportunity to purchase your first home for the same as it would cost you to rent if you know what to look for. My prediction is that interest rates will continue to drop and rents will continue to rise.
3. “I’ve got a job, a spouse, kids and little time on my hands”
Stop pouring rent money onto paying of some one else’s mortgage. Turn of the television and you will have all the time you need. Load the kids in the car this weekend and start looking at open houses. Start speaking with experienced real estate agents, first home builders and finance brokers to assist you in fulfilling your dream of home ownership.
4. “Real Estate is risky”:
History proves real estate is one of if not the safest and most reliable investment vehicles on the planet. Since the 1970s residential real estate in Australia has enjoyed returns of 6% per annum. Some would say that a term deposit pays the same return but if you take a property worth $400,000 that increases in value by 6% in one year that is the equivalent of saving $24,000. Banks also view property as a relatively safe investment considering they are prepared to borrow up to 95% of its value.
5. “There’s too much competition:” Success in life comes from doing things differently. If you look at what everyone else is doing and do the opposite you will most probably discover over the medium to long term you are wiser than you gave yourself credit for. Don’t follow the herd mentality. Buy when very few people are and if you have to sell, when everyone else is buying.
6. “I need more information before I start”: We live in the information age. Read some of the many books available on the subject, do research on the internet, talk to other successful property investors. Begin to seek help and build a mastermind team to assist you to reach your goals. It’s true there are sharks out there but there are also many people who love to see others succeed. Your dreams and the life you desire is usually discovered just outside of your comfort zone. Are you willing to explore?
