4 traps to avoid for first home buyers

By Anouska Linz
When buying your first home, there are a number of new processes that you will need to wrap your head around and it may result in financial traps. However, it is easy to avoid these mistakes by taking a few pre-emptive steps. See what financial traps to avoid when buying your first property.
Borrowing more than you need
A lender will look at your financial situation and assess your income, assets and liabilities to calculate the maximum loan amount you can borrow.
This can become a dangerous trap for first home buyers if you borrow over your budget. Before applying for a home loan, research the type of properties you are interested in and what price range would suit your budget. Then, when it comes time to applying for a home loan, you will know what amount you can handle. Borrowing the maximum amount the lender is offering you, even when you don’t need it, may mean you will end up paying a large amount extra in interest and it could place significant strain on your budget down the track.
Not saving a sufficient deposit
Saving a large deposit can be extremely advantageous when you apply for a home loan.
Having only saved a small deposit could classify you as a high-risk borrower and as a result, lenders need to implement a safety net in case you default. Some examples include paying a higher interest rate, additional fees and charges and Lenders Mortgage Insurance, which is a one-off fee that could equate to thousands of dollars.
Saving as much as you can before buying will not only either lower the amount of mortgage insurance you need to pay or remove it all together, it will also give you a wider variety of lenders and loans to choose from. Having a large deposit could mean you can actually choose which lender you want rather than be stuck with a lender that will take you. Saving for a deposit will also give you discipline required for making mortgage repayments in the future.

Overspending on a renovators delight
Renovating a property, especially your first home can be extremely risky of you are an inexperienced renovator. Many make the mistake of not researching the property market and the costs involved in renovating the property and as a result, overspend and end up selling the property for less than what they originally purchased it for.
Not organising a pest/building inspection
Pest and building inspections are highly recommended before purchasing a property to ensure it is in a reasonable state and you will not be subject to any nasty surprises after you move in. But did you know these inspections could save you money in the short term?
Buyers are always looking for ways to negotiate the purchase price down and it is possible to increase your negotiating power just by getting a building and pest inspection done. If you find problems with the property such as mould or termites, you can use this to show the property isn’t worth the purchase price and ask for a discount.

After purchasing a property, buyers do not have any legal protection, so if you find termites a few weeks after moving in, the previous owner does not have any legal obligation to fix it. Although there is an upfront cost, it will be well worth it down the track.

Anouska Linz is Manager, Online Sales at State Custodians and has over 10 years’ experience in financial services, both in broking and banking. Holding a bachelors degree in accounting, Anouska quickly discovered a love for mortgage lending and assisting people to achieve their home ownership goals. She leads a team of highly experienced lending specialists who are passionate about finding lending solutions which result in real wins for the customer. She is also a massive netball fan.

For more information on our home loans, visit www.statecustodians.com.au or call 13 72 62.