Whether you’re looking to upgrade, downsize or even purchase your first home in 2015, it makes sense to financially plan ahead.
Futureproof your next move
Principal at Hillross Aspire Lisa Barber has more than 20 years of experience advising clients on how to successfully plan for a property purchase. She says a critical factor is looking ahead and selecting a property that matches your future plans.
‘Think about how long you want to hold the property for. Do you plan to live in it for a year while you renovate it, then sell it? Are you planning to live there for five years? Or do you see it as a home you will be in for decades? Your answer will influence the location, style and cost of the property you buy.’
How much can you really afford?
Despite the emotional nature of buying a home, Barber advises clients to be ‘very honest and realistic when they crunch the numbers, and always stick to their limit’.
She says buyers should apply ‘pressure tests’ to check their personal affordability status.
‘First, ensure you can afford to make repayments at 2 per cent more than the current interest rate. If a 2 per cent rate rise would put you under significant financial pressure, you may need to consider dropping your upper limit.’
The other pressure test is to ask yourself if you have the emergency funds to pay the mortgage for a few months if you find yourself in difficult circumstances.
‘Around 1 in 3 Australians will be made redundant in their lifetimes. Many also have to stop work for a period due to illness. You need something in reserve so you can financially cope with such situations.’
Tap into professional advice
Barber says using a buyer agent can help you purchase the property of your dreams at a price you can afford.
‘As well as having access to ‘off-market’ and ‘urgent sale’ properties, they will also negotiate on your behalf, which could save you thousands.’
While buyer agents charge a fee for their services, Barber says this is often offset by the savings they achieve on the purchase price.
‘I also advise property purchasers to see a financial adviser. Financial planners can assist you to work out how much you can afford, negotiate competitive rates from lenders, and give you peace of mind around what’s possible given your unique financial circumstances.
‘Unlike family and friends, you can be frank about your finances with a financial planner, who can then provide you with objective, neutral advice.’
Barber says good financial planning differs at every life stage. ‘If you’re looking to retire and downsize from the family home into a unit or townhouse, you will need to make sure you have enough funds left over to support your retirement lifestyle.
‘Retirees might consider buying off the plan, as many new builds include features they might need, such as a lift.
‘Buying off the plan can offer savings because you buy the property at today’s price but don’t pay for it until completion. This strategy can also work for first-home buyers.’
Meanwhile, if you have a growing family and want to upgrade to a larger property, Barber says you might need to think outside the square.
‘In capital cities in particular, there’s a big jump in price if you want to move from a unit to a house with a garden. One option is to keep and rent out your smaller property while you rent a larger property in the area of your choice. This can effectively buy you some time to save the deposit on a larger home.’
Making a property purchase in 2015 may be easy with a little financial planning, so obtaining some expert advice could be the best decision you make next year!