BUYING THE MONEY PIT
Sometimes first home buyers think they need to buy a rundown house and tart it up to get into the market. The kind of home the agent refers to as a “renovator’s delight”, but are, in fact, only delightful if money pits bring you joy.
Financial comparison website Mozo.com.au’s property and lending expert, Steve Jovcevski, cautioned against falling blindly for the DIY fantasy.
“If you’re going DIY, don’t forget that there are certain things, such as electrical wiring, that you need to hire a licensed contractor for,” Mr Jovcevski said.
“Make sure you get property inspections done to find out the extent of the work that needs to be completed, and gets quotes from contractors so you can budget properly for them.”
Furthermore, banks often won’t lend on a property that is deemed uninhabitable.
“So if your lender inspects the house and finds that it’s unlivable, they may not agree to give you a mortgage, or only lend you a fraction of what you ask for,” Mr Jovcevski said.
“While some banks will lend going off the contract price of a property, you can’t rely on that.
“It’s important to be upfront with your bank about the property you’re looking to purchase, so you can be sure you’ll secure the loan you need.”
NOT UNDERSTANDING MORTGAGES AND MONEY
We get it. Securing a mortgage and filling out paperwork is burdensome, but if you don’t pay attention to the details you can end up big trouble.
First home buyers often forget to factor in additional expenses, such as stamp duty, mortgage and solicitor fees and mortgage insurance.
While it may be tempting to cut back on professional advice to save money, Mr Cohen said this was a bad idea.
“Make sure you get a solicitor to look at your contract because they can pick up all sorts of things that turn a good property into a bad one, such as heritage overlays or problems with the body corporate,” Mr Cohen said.
Mr Cohen said first homebuyers desperate to get a foothold after years of feeling locked out of the market, shouldn’t feel grateful for just any old property.
“They should remember that their money is as good as anyone else’s,” Mr Cohen said.
“The first property you own really is a stepping stone for your life and it’s so important to get that right.”