There are a number of benefits of buying property solo. However, there is a lot more responsibility that comes with it as well.
Purchasing your first property is a huge achievement, but can you do it on your own?
The answer is yes. According to the Australian Bureau of Statistics, 22% of first time buyers were single person households. There are a number of benefits of buying property solo. For example, you can buy where you want and you can use the property however you like (investment, to live in) and you can sell the property when you want. However, there is a lot more responsibility that comes with buying by yourself.
If you are considering buying your first house on your own, take a look at these tips below to give yourself the best chance of succeeding.
Think long term
A property purchase is not a short term commitment, especially if you have a mortgage. Home loans are typically taken over 30 years, even though you could sell the property and buy another in that time. It is a big commitment and costly setup fees like stamp duty and mortgage insurance mean it is important to think about the property as a long term investment.
Even if you were able to snatch up a bargain, what will the property be like in the future? Are there a lot of maintenance issues that will need to be fixed? If so, you may find that the labour costs end up costing you more and outweigh the benefit of purchasing this bargain property. Also, have you considered the future of the area you purchased in? Because finding the right area will help boost the chances of selling your property for a profit down the track.
Have a financial plan
Buying solo means lenders will be relying on your assets, liabilities and income alone in order to qualify for and repay the home loan. Purchasing a property could take a number of years if you wish to save a sufficient deposit. A 20% deposit can help cut out fees such as Lenders Mortgage Insurance, which can often add up to thousands of extra dollars. Put your savings goal into our savings calculator to help crunch the details.
So, before embarking on this journey, think about how long it would take to save the deposit you want and also think about what the monthly repayments would be. Would you be able to afford this property under your current circumstances? Repayment calculators help you do this, so have a quick look at this one to give you some numbers to use.
Be prepared to compromise
Even though you don’t have to cater for another person’s wants and needs when buying a property on your own, you will need to think about the rest of the market. For example, properties in capital city areas are in high demand, which therefore hikes the prices up on a lot of property. So, if it is not within your budget, then you may have to look further away from the CBD for a more affordable area. With a single income to rely on, your choices may be more limited. Consider friends and family help
Even if you decide to purchase a property on your own, it doesn’t mean you can’t get the help you need from family and friends. Firstly, speak with your parents or other family members who have purchased a house as they may be able to give you insider advice and tips on how to find the right property.
Assistance from parents
Your parents could also help you secure a home loan by giving you a gift or becoming a guarantor. Using a guarantee is where your parents offer the equity they have in another property as additional security for your loan. The loan is then secured over both the property you purchase and their property, thereby substantially increasing the equity that the bank has available to it. It is often used to reduce the lending ratio to below 80% so that no mortgage insurance is added.If a guarantee is an option, give one of our credit managers a call on 13 72 62 to go through the pro’s and con’s.
Your friends can also give you the support you need at auctions. By having another person there, they can help keep you calm and level-headed when the bidding goes over your budget. Often people let their emotions get the better of them when bidding at auction..
As a first home buyer, there are many benefits to buying a property solo and it is not as daunting as you may think if you take the time beforehand to research and prepare.