Expanding the family
I arrived back from Bali this morning after a blissful 10 days of sun baking, massages and just generally loving life. Whilst it saddens me that my holidays are now over (until the next one), it always puts me in the right frame of mind for reassessing my goals and working towards the next thing.
There has been one thing buzzing in my ear for quite a while, that has been getting louder and louder, and now I think it is time to take to first steps to do something about it.
After lengthy discussions over Bintangs, my husband and I have decided that it is time to grow our little family. You guessed it, we want to buy a puppy. It’s a pretty important step in any newlyweds life and one that we do not take lightly. We have had various, sometimes heated conversations about what kind of dog we would like, how we intend on treating it, what sex it is and what sort of tricks we should teach it.
Now this may seem like a pretty simple goal, just go out and buy the cute little guy I hear you say. The problem is that we live in a unit, which would be just down right cruel to a puppy whom is likely to have bounds of energy.
So, whilst the end goal for us is to buy a puppy (or two), we actually need to buy a house that has a back yard and a fence, you know a real family home. We are hoping that this will be a reality for us in the next year and are now working towards this and ensuring our finances are directed towards this important goal.
People buy and sell houses every day, but it’s a pretty big deal and can be very confusing regardless of whether you have bought before or not. I remember when we bought our current unit, I felt like a stunned mullet when we were signing our first contract. Luckily for me at that time I had an awesome mentor who had done this 1000 times before so was a wealth of knowledge for us and I am forever grateful for that.
So, I have my top 3 tips for buying a house regardless of whether it is your first property or not.
1. Have a large deposit – If you have a deposit of 20% or more, then you don’t need to pay mortgage insurance. This expense is pretty costly and something to factor in. So when you are looking at houses, make sure you set a limit so that you don’t trigger mortgage insurance. I would much rather spend that money on decorating my new abode.
2. Mortgage brokers are awesome – Independent mortgage brokers literally do the leg work for you, at no cost to you. It surprises me that most people just stroll into their bank and ask for a home loan without checking out the market. Just because you have been a loyal banker with an institution for several years, doesn’t mean they are going to give you the best available rate.
The beauty of mortgage brokers is that they will do the work for you and present you with their best options. You can work with the brokers to outline the features and benefits that you require within your loan and they will compare the options for you.
As also mentioned, this doesn’t cost you a cent out of your pocket. So, how do they make money? They will receive a commission from the lending institution that you end up going with, and this will be fully disclosed to you in the contracts that you must sign.
There is nothing wrong with this, and it also doesn’t mean that the loan will be more expensive than if you sourced it yourself. As long as your mortgage broker is independent, you should feel confident that they are getting you the best deal. It’s literally a Win/Win situation. You get a tailored home loan and you don’t have to pay for the service.
3. Protect your income – Great, you have found the perfect home for you and are happily making your repayments, but what would happen to your home if you were unable to service the loan?
Whilst I think several types of insurance are important, income protection insurance provides ongoing income should you be unable to work due to illness or injury (even if it is for a short period of time). If you were unable to work for 3 months, would you have enough funds available to service the loan, or would it be a struggle? What about if you were unable to work for 1 year, would you still be able to keep up with the repayments?
Whist we don’t like to think that these things can happen to us, history shows it sometimes does. It would be terrible to lose your home due to an injury or illness that kept you from working.
So you are probably wondering why in point 1, I want you to avoid insurance, and in point 3, I want you to get insurance, I must sound like I am still coming down from the beach cocktail coma. Mortgage insurance covers your bank, so you pay for insurance that your bank would get the benefit from. Income protection insurance covers you, and you would get the payout. It would pay you personally up to 75% of your income on a monthly basis. So, if you are going to pay for insurance, wouldn’t you rather cover yourself over your bank? I know which one I would choose.
So there you have it. All of these tips apply to any person in the market for a house and could set you up for smooth sailing ahead.
Now I am off to research houses with big back yards and dog parks close by.
– This post is from our resident senior financial planner, Cara Brett. Check out her details in our about us page.