If old pal COVID has put somewhat of a spanner in the works of your 2020 property plans, you’re most certainly not alone. Aside from the obvious issues of social distancing and cancelled auctions, the economic uncertainty means less supply, less demand, and a very unpredictable property market.
That said, as we emerge from shutdowns and begin to get a clearer picture on how we’ll move forward from here, buying and selling of homes will be able to resume—which means you can get back to your bathroom inspo Pinterest board and start making property moves.
Here are the five things you need to get started on your property journey:
#1 A Deposit
Props to us for stating the obvious, right. It sucks, but a big ol’ chunk of cash is one major requirement for buying your first home. That said, don’t be fooled into thinking you need to have a 20% deposit saved up. Some financial institutions may lend more than 80% of the property price, and if you’re able to score a great property during a market downturn, it could be worth your while. So, speak to your bank or broker for advice tailored to your circumstances.
#2 Evidence Of Employment
A loan application is basically you proving to the lender that you’re able to pay back the loan—they call it serviceability. A major element in your serviceability is your employment status. Generally lenders want to see six months of continuous employment, and not a probationary period in sight. To give yourself the best chance of mortgage success, apply when you’ve got a robust track record of employment under your belt.
#3 Clean Spending Habits
Been over-indulging in Uber Eats and online clothes shopping in iso? It’s time to clean up those accounts. Lenders will look through your bank statements for signs of reckless or problematic spending when assessing how good of a mortgage candidate you are. That’s not to say your Friday night Thai binge will render you homeless. They’re just looking to create a clearer picture on how you spend your money, and how that might affect your ability to repay the loan on time each month.
Major things to cut back on are buy now pay later schemes, gambling, and frequent high ticket purchases.
#4 Minimal Debt
Yuhuh, we’re looking at you, Afterpay. Consumer debt like credit cards, personal loans, and the likes of Afterpay and ZipPay all contribute to your borrowing capacity, so it’s important to pay attention to your debts when applying for a mortgage. Lenders can assess your credit cards based on their limits, not their balances, too—so it could be time to close down the plastic.
A mortgage pre-approval essentially involves your lender assessing your financial situation and establishing how much they’re willing to lend you. This will really help you in calculating your maximum budget, and upper limits for bidding at auction or making offers on properties. For example, if you have a $50,000 deposit, and you’re pre-approved for a loan of $400,000, you’ll be able to work with an upper limit of $450,000*.
*figures are for illustrative purposes only and should not influence or inform your property budget.
Keen to get your property savings in order? These nifty new neo banks have some tasty interest rates and exciting features to help you on your way.
Image Credit: Ivo de Bruijn
Emma is a finance blogger at The Broke Generation and a reformed spendaholic. She shares hot tips on saving, property, tax, career and investing for millennials who want to break the spending cycle and get financially confident.