Buying a home
5 costly mistakes that home buyers make
24 July 2020
Buying a house can be one of life’s more stressful events. Whether you’re a first home buyer or a property investor, or you’re downsizing or upsizing your home, here are five potential mistakes home buyers should avoid.
1. Not doing a financial health check
Have you curbed unnecessary living expenses? Reduced your outstanding debts? Before you start talking to lenders, you may need to review your finances.
Start with your income and expenses. These include your salary, loans, credit cards and other expenses, such as living costs. You might also consider how much of your savings you’ll have left after buying a property. If your personal circumstances were to change, perhaps because you lost your job, you’ll still want some cash reserves to help you manage your mortgage repayments and cover your living expenses.
2. Going over budget
Every home buyer knows the gut-wrenching feeling of their dream home being priced just above their budget. But you should resist the temptation to throw caution to the wind and spend that extra money. Going over budget could expose you to financial shocks – for example, if interest rates go up but you’re already paying as much as you can afford, the increased payments could lead to you experiencing financial difficulty and not being able to make your loan repayments. Remember, too, that borrowing more than 80% of a property’s total value can mean that you need to pay Lender’s Mortgage Insurance (“LMI”). LMI is a once-only cost that protects your lender in case you default on your loan.
If you want to figure out how much you can afford to borrow, Suncorp Bank’s Home Loan Calculators may be able to help.
3. Not getting pre-approval for a home loan
To make an offer on a house with confidence, you should consider getting a pre-approved loan. Pre-approval means that a lender has indicated the maximum amount they’d be comfortable lending you in theory, subject to certain conditions being fulfilled. While a pre-approval is not a full or final approval, it allows you to know your maximum available funds so you can narrow your search, negotiate with more certainty and place an offer with more confidence.
If you’re seeking loan pre-approval in the home buying process, you can get your obligation free application underway now.
Pre-approval helps you estimate how much you can borrow, and what your upper limit is, which can help give you confidence looking for a house.
If your mortgage is affordable, you’re more likely to be able to save for things like holidays and maintain your current lifestyle.
If it’s your first home, then we really want to help you get this right – by not over borrowing. Because if you get your first home right, and you put a good amount of deposit down, it’s going to help set you up for the future and stay in control, instead of chasing your tail.
It’s a good idea to think about the future, you might have dual income now, but what if a baby comes along or you need to drop from two incomes to one, then one person’s income may need to cover the mortgage.
If you haven’t planned for changes in your life, and you’ve borrowed 95% of the property’s value, it can be high pressure.
So pre-approval can give you confidence to focus on properties you can afford. It helps you understand how much you can borrow and think about how much you should borrow.
Home loan pre-approval is based on the ability to repay a loan for a specific amount based on your financial position, and it lasts for 3 months.
To apply for a pre-approval, make an appointment with a Suncorp Bank Mobile Lender online.
4. Skipping building inspections
Budgeting for pre-purchase inspections is crucial. However, many home buyers cut corners when it comes to getting building and pest inspections or strata reports. Doing so might seem tempting, but could lead to greater expenses with repairs or pest removal down the line.
Get an independent building and pest report for any house you’re thinking of buying. You can order strata reports to get insights into the body corporate or owners corporation for an apartment block or townhouse complex, such as levies, insurance, financial position and by-laws.
5. Misunderstanding the roles of property professionals
There are a lot of professionals involved in you getting your property. A conveyance often involves a lender and conveyancer for each of the buyer and the seller, together with the buyer’s mortgage broker and the seller’s real estate agent. Understanding how they all fit together is critical.
For example, it’s all well and good to talk to real estate agents, but remember who they actually work for. At the end of the day, they’re likely to earn a commission on the sale of the property, so are more likely to have the seller’s interests at heart. There are ways around dealing with property professionals. This could include engaging a buyer’s advocate to represent your interests and help you navigate the home buying process. Learn more about buying a home using a buyer’s advocate.
- How to apply for a home loan from your couch
- How much do you (really) need for a house deposit?
- Buyers advocate Andrew Date answers some common home buying questions
Home Loans are provided by Suncorp-Metway Ltd ABN 66 010 831 722 AFSL No. 229882 Australian Credit Licence 229882 (“Suncorp Bank”) to approved applicants only. Fees, charges, terms and conditions apply and are available on request.
Information is intended to be of a general nature only and any advice has been prepared without taking into account any person's particular objectives, financial situation or needs. You should make your own enquiries, consider whether advice is appropriate for you and read the relevant Product Information Document before making any decisions about whether to acquire a product.