I don’t know which is scarier: choosing your first house, or choosing your first mortgage. Of course, these are exciting times, but they are big decisions that have a significant impact on your future, so these choices should definitely not be made lightly.
It’s about ten years ago that I chose my first home and my first mortgage, and I was really in a great position to do a good job at this decision. I’d grown up with a mother who was a real estate agent, and a father who was a bank manager – what could be more perfect? I think I managed to make a fairly good choice for my first real estate purchase, and I also learnt a lot, both from what my parents taught me and my own experience. If you’re about to embark on the adventure of buying a property and getting a mortgage for the first time, then my tips for both of these are pretty similar:
Tip 1. Before you start looking for your first home, and the accompanying mortgage, sit down and make a list of what you’re after. I’d suggest a “must” list – for example, if a location close to your relatives or work is important, add that to the list, or perhaps you need a minimum of two bedrooms, or you simply have to have a reasonably-sized garden – and a “would like” list – that is, desirable attributes that you could be flexible about if necessary. The same goes for the mortage. Calculate the maximum amount you could afford to pay towards a mortgage out of your regular income. You might need to take careful note of your regular income and expenses over a few months to be sure about how much you can afford. There may also be some features of a mortgage that you think you’ll need, for example, the option of redrawing some of the money you’ve paid in, or the ability to increase repayments – perhaps you are confident you’ll have a much better paying job soon and will be able to afford to pay off your mortgage faster, and don’t want to have any penalties attached to this.
Tip 2. If at all possible, don’t be in a hurry to decide on either a property or a mortgage. As with all big decisions, making choices in a rush is rarely a good idea. Put aside at least a few months in which to look around and make a purchase, and try not to have any other major life events happening at the same time. House-hunting and organising your mortgage can take up a lot of time and in some cases can be pretty stressful, so go easy on yourself and don’t try and do this at the same time as you’re getting married or starting a new job.
Tip 3. Once you’ve started finding homes you like, keep shopping around. Don’t buy the first place you fall in love with, unless you have the chance to compare it to others before you have to sign a contract. The same goes for a mortgage. It might seem easy to walk into your regular bank branch and just ask them to set up a mortgage, but the chances are slim that you’ll be getting the best deal. Talk to a mortgage broker or to a selection of lenders and find out all the options available to you – this could save you many thousands of dollars over the years.
Tip 4. And finally, don’t forget to trust your instincts. If it doesn’t feel right, it isn’t. Perhaps a house or unit fulfils all the criteria on your list, but there’s just something about it that you don’t like – then don’t buy it. Again, the same applies to your choice of mortgage. Don’t let a mortgage professional bamboozle you with jargon and push you into a mortgage contract that you’re not absolutely sure about. Ask questions, ask for time to think about it, and compare the deal with others before you sign up.
Having said all that, try to enjoy the experience as well. Buying your first home might be a bit scary, but it’s also a really exciting time and you will always remember the first place you lived in where you didn’t have to pay rent. As for the mortgage, you’ll probably only remember your first mortgage if something goes wrong, so do your research, ask all the questions you need and be sure before you start signing such an important contract.