‘On a hiding to nothing’: What I wish I knew before buying my first property

What do you wish you knew before you bought your first property?

When we put this question to four members of the Money team, it wasn’t a list of boom suburbs they wished for, but a better understanding of just how mortgages and the cost of home-ownership work.

Here’s what they had to say.

Pay it down

I wish I knew more about the mechanics of paying my home loan faster before I bought my first property.

I think I’m one of the lucky ones who bought my first property when I was only 21 years old but not by design, my dad forced me into it! He said I should get myself a mortgage as soon as possible and use time to my advantage.

But I wish someone sat me down back then and explained to me how interest rates worked and the benefits of paying more than my minimum monthly mortgage payments. I would have budgeted more towards it.

I think we all need to read publications like Money magazine earlier in life.

– Michelle Baltazar, editor-in-chief

Commit to the reno

Before buying my first property I was all about saving what I could and not taking a loan to include the renovations I wanted to do.

In retrospect, the cost of renovations is always going to rise, so once you’ve bitten the bullet to buy the house you may as well get on with as many renovations you can afford early in the piece, that’s if you know what you want to do.

If you’re not sure what needs to be done, then put the renovations on hold, but make sure the money is ready for when you are. I bought the home and put in all the money I had.

I had budgeted for a new bathroom as that was a necessity but I couldn’t even paint the house until I had worked extra jobs to afford the paint. Luckily I had family around to actually do the painting!

– Julia Newbould, editor-at-large

Find a way in

Negative gearing can be a tax-effective way to maximise the capital appreciation of a property, as the net loss from the shortfall between rental income and mortgage repayments can be deducted from your taxable income.

It also gave me entry into the property market earlier than I would’ve had otherwise. But it still means you need to find money to plug the difference each month, and that has at times been a serious strain to my cashflow.

That said, the current low-rate environment has gone a long way to alleviating this pain, and goes to show how important it is to refinance as rates fall. I don’t look forward to the day when rates rise and my fixed-rate expires.

– David Thornton, staff writer

Understand the interest

I wish I knew what the interest on your home loan actually costs you (even at low rates and with a smallish offset). We pay our mortgage fortnightly and the interest is charged monthly.

In the first month we were charged interest that equalled almost two-thirds of our repayments – so initially it seemed we were on a hiding to nothing.

Thankfully over the course of three years this has come down significantly. This is because we now pay more than the minimum fortnightly repayment and have boosted the offset.

– Darren Snyder, managing editor

From Money Magazine

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These articles provide you with factual information only, and are not intended to imply any recommendation about any financial product(s) or constitute tax advice. If you require financial or tax advice you should consult a licensed financial or tax adviser. The information in these articles is believed to be reliable at the time of distribution, but EFS does not warrant its completeness or accuracy. Neither EFS nor its related bodies, nor their directors, employees or agents accept any responsibility for loss or liability which may arise from accessing or reliance on any of the information contained in these articles. For information about whether a loan may be suitable for you, call EFS on 02 8041 6746.